When the marginal cost of producing a bike is greater than the marginal benefit of the bike, for resource use to be allocatively efficient,
A) people must be educated to demand more bikes.
B) it must be determined if the production of bikes can be increased.
C) more bikes should be produced.
D) no more and no fewer bikes should be produced.
E) fewer bikes should be produced.

Question

Quizplus · Accepted Answer

For resource use to be allocatively efficient, production should align with the point where marginal cost equals marginal benefit. If the marginal cost of producing a bike is greater than the marginal benefit, producing fewer bikes would move towards this point of allocative efficiency, reducing the overallocation of resources towards bike production.

When the Marginal Cost of Producing a Bike Is Greater