THE 3 Es!

The three basic economic questions that arise out of the problem of scarcity are
1) What to produce
2) How to produce and
3) For whom to produce.

so... THERE ARE THE 3Es that follow! the aE, dE, and *drumrolls* pE!

( AE ) Allocative Efficiency (What)
situation in which society consumes a combination of goods and services that maximizes its welfare - MAXIMUM UTILITY.

**AE is achieved when P = MC

( DE ) Distributive Efficiency (For whom)
occurs when goods and services are produced to those who want or need them.
( PE) Productive Efficiency (How)
is the absence of waste in the production process.

All - points on the PPC are productive efficient, points inside the PPC are inefficient representing either unemployment or underemployment

§ **For producers, all points on the LRAC are PE

§ ** For consumers, only the MES (min pt of LRAC) is PE