Which one of the following conditions is required for allocative efficiency?
A)Marginal revenue product exceeds the value of marginal product by the greatest amount
B)Marginal revenue product equals the wage rate
C)Value of marginal product equals the marginal wage cost
D)Value of marginal product is the same in all alternative employments of a given type of labor

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when resources are allocated such that the value of the marginal product (VMP) is equal across all alternative uses of the resource. Therefore, D is the correct answer as it states that VMP is the same in all alternative employments of a given type of labor. A, B, and C are incorrect as they do not necessarily ensure allocative efficiency.

Which One of the Following Conditions Is Required for Allocative