1) What is allocative efficiency? a) Using resources to generate the maximum benefit for consumers and society b) Producing at the lowest possible cost c) Producing only luxury goods d) Specialising in labour-intensive goods 2) The law of diminishing marginal productivity means: a) Each additional unit of input increases output by the same amount b) Additional units of a variable factor eventually produce less additional output c) Output will always increase with additional input d) Costs decrease as productivity falls 3) What best defines productive efficiency? a) Achieving the maximum output from a given quantity of productive resources b) Minimising input quality c) Producing goods valued only by producers d) Maximising profits at all costs 4) Internal economies of scale happen when a) A firm gains cost benefits as its own operations increase in size b) Entire industries become more efficient c) The government intervenes in markets d) Only resource costs decrease 5) Dynamic efficiency relates chiefly to a) Producing at constant prices b) Responding to changing consumer demands and innovation c) Allocating resources without regard to innovation d) Government production of all goods 6) The principle of diminishing returns is another name for: a) Law of diminishing marginal productivity b) Law of mass production c) Law of excess supply d) Principle of increasing costs 7) Marginal cost is: a) The average revenue per product b) The total cost of all production c) The cost of the most expensive input d) The cost of producing one more unit of output 8) Which efficiency type ensures goods are distributed to best satisfy consumer wants? a) Dynamic b) Productive c) Technical d) Allocative 9) Productivity measures: a) Total resources used b) Rate of output per unit of input c) Total profit made d) Only labour input 10) Firms mostly increase productivity by: a) Reducing innovation b) Limiting capital investment c) Increasing specialisation d) decreasing economies of scale 11) An example of an external economy of scale is: a) A firm building a new facility b) Growth of an industry improving infrastructure beneficial to all firms c) A company downsizing labour d) A business selling niche products only 12) When a firm grows too large and per-unit costs rise, this is called: a) Dynamic inefficiency b) Economies of scale c) Diseconomies of scale d) Marginal utility 13) Technical efficiency means: a) Maximizing output from a given input mix b) Producing with the highest cost inputs c) Allocating resources based on demand d) Government control of production 14) In perfect competition, firms are: a) Price makers b) Price takers producing at lowest cost c) Restricted from producing at lowest cost d) Able to negotiate individual prices with customers

Efficiency Quiz

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