Allocative efficiency refers to a situation where
A)opportunity costs are equal for all goods.
B)we cannot produce more of any one good without giving up some other good.
C)goods and services are produced at the lowest possible cost and in the quantities that provide the greatest possible benefit.
D)opportunity cost is zero for all goods.
E)marginal benefit is maximized.

Question

Quizplus · Accepted Answer

Allocative efficiency means distributing resources in a way that maximizes social welfare or utility. In other words, goods and services are produced at the lowest possible cost, and in the quantities that provide the greatest possible benefit to society. It happens when consumers have the greatest possible satisfaction, and all goods and services are allotted wisely. It is done by increasing the production of goods where the marginal benefit exceeds the marginal cost and decreasing production where the marginal cost exceeds the marginal benefit.

Allocative Efficiency Refers to a Situation Where