The diagram below shows the demand and supply curves in a perfectly competitive market.
FIGURE 12- 5
-Refer to Figure 12- 5.Allocative efficiency occurs
A)at price P1 and output Q3.
B)at output level Q3.
C)at output level Q1.
D)at price P2 and output Q2.
E)where the areas 1,2,3,and 4 are maximized.

Question

The diagram below shows the demand and supply curves in a perfectly competitive market.
  FIGURE 12- 5
-Refer to Figure 12- 5.Allocative efficiency occurs
A)at price P1 and output Q3. 
B)at output level Q3. 
C)at output level Q1. 
D)at price P2 and output Q2. 
E)where the areas 1,2,3,and 4 are maximized.

Quizplus · Accepted Answer

Allocative efficiency occurs where the price equals the marginal cost of production, which is typically at the equilibrium point where supply equals demand, represented by price P2 and output Q2.

The Diagram Below Shows the Demand and Supply Curves in a Perfectly