In a competitive market economy with no externalities,allocative efficiency would exist if

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when resources are allocated in a way that maximizes society's welfare by producing goods and services that are most valued by consumers. This occurs when prices equal marginal costs in all markets, as this ensures that the last unit produced is valued by consumers at least as much as it costs to produce. Prices equaling anything other than marginal cost would result in either allocative inefficiency (prices are too high relative to costs) or a market failure (prices are too low relative to costs). Therefore, choice C is the correct answer.

In a Competitive Market Economy with No Externalities,allocative Efficiency Would