When the market achieves allocative efficiency,
A)marginal benefit equals marginal cost.
B)marginal benefit is at its maximum.
C)marginal benefit minus marginal cost is positive.
D)marginal cost minus marginal benefit is positive.
E)marginal cost is at its minimum.

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when resources are allocated in a way that maximizes the net benefits to society. This means that resources are being used in such a way that the marginal benefit (the additional benefit gained from producing one more unit of a good) is equal to the marginal cost (the additional cost of producing one more unit of a good). Therefore, when the market achieves allocative efficiency, marginal benefit equals marginal cost.

When the Market Achieves Allocative Efficiency