Resource use is allocatively efficient when marginal benefit is
A) equal to marginal cost.
B) less than marginal cost.
C) greater than marginal cost.
D) at its maximum value.

Question

Quizplus · Accepted Answer

Allocative efficiency is achieved when marginal benefit is equal to marginal cost, meaning that resources are being allocated to produce goods and services that are valued the most by consumers. If marginal benefit is less than marginal cost, then the resources are being wasted and if marginal benefit is greater than marginal cost, then there is potential for more social welfare that can be created. Therefore, choice letter A is the correct answer as it reflects the optimal allocation of resources.

Resource Use Is Allocatively Efficient When Marginal Benefit Is