An economy redistributes resources and moves along its production possibility frontier. It raises the output of necessity goods and lowers the output of luxury goods. The marginal utility enjoyed by the consumers of the extra necessity goods produced is higher than the marginal utility enjoyed by the consumers of the luxury goods that are no longer produced. What effect does this have on the economic efficiency of the economy?
- Aproductive efficiency increases; allocative efficiency increases
- Bproductive efficiency increases; allocative efficiency unchanged
- Cproductive efficiency unchanged; allocative efficiency increases
- Dproductive efficiency unchanged; allocative efficiency unchanged