Which of the following best describes how goods and services should be produced to achieve productive efficiency?

• A. By using the least-cost combination of inputs to maximize output
• B. By maximizing the total revenue from the sale of goods and services
• C. By distributing goods and services equally among all members of society
• D. By producing goods and services that reflect consumer preferences

Answer: (A)

Verified step by step guidance

1. Understand the concept of productive efficiency: it occurs when goods and services are produced at the lowest possible cost, using resources in the most efficient way without waste.
2. Recall that productive efficiency focuses on the production side, meaning how inputs (like labor, capital, and materials) are combined to produce output.
3. Recognize that achieving productive efficiency means minimizing the cost of production for a given level of output, or equivalently, maximizing output for a given cost.
4. Identify that this involves using the least-cost combination of inputs, which can be expressed as minimizing the cost function \(C = wL + rK\), where \(w\) and \(r\) are input prices, and \(L\) and \(K\) are quantities of labor and capital respectively.
5. Conclude that productive efficiency is best described as producing goods and services by using the least-cost combination of inputs to maximize output, rather than focusing on revenue maximization, equal distribution, or consumer preferences.