For an entire economy,allocative efficiency requires that
A)goods are allocated equitably across markets.
B)marginal cost equals price for all goods.
C)MRP is equated for all factors of production.
D)price equals average cost for all goods.
E)price is greater than marginal cost for all goods.

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when the quantity of goods produced maximizes societal welfare, and this occurs when marginal cost equals price for all goods. When marginal cost equals price, the value consumers place on the marginal unit produced (price) is equivalent to the cost of producing that unit (marginal cost), meaning there are no opportunities for gains in either producer or consumer surplus. Therefore, option B is the correct answer.

For an Entire Economy,allocative Efficiency Requires That