Which of the following is the consequence when the allocative function is performed?

Statement 1: The rate of return offered to the household would be less.

Statement 2: Scarce resources are allocated to those firms which have the lowest productivity for the economy.

Neither statement 1 nor statement 2 is true

When the allocative function is performed well, two consequences follow:

• The rate of return offered to households would be higher.
• Scarce resources are allocated to those firms which have the highest productivity for the economy.