Which of the following will be accomplished by efficient allocations of the factors of production?

• A. Reduction in the number of available resources
• B. Maximization of total output in the economy
• C. Increase in the price of all goods
• D. Elimination of opportunity cost

Answer: (B)

Verified step by step guidance

1. Understand the concept of efficient allocation of factors of production: it means resources (land, labor, capital) are used in a way that maximizes total output without wasting any resources.
2. Recall that efficient allocation does not reduce the quantity of resources available; rather, it optimizes their use to produce the greatest possible output.
3. Recognize that efficient allocation does not inherently cause prices of all goods to increase; prices depend on supply and demand conditions, not just efficiency.
4. Understand that opportunity cost cannot be eliminated because choosing one option always involves forgoing another; efficiency minimizes wasted resources but does not remove trade-offs.
5. Conclude that the main outcome of efficient allocation is the maximization of total output in the economy, meaning the economy produces the highest possible quantity of goods and services given its resources.