Resource use is allocatively efficient
A) whenever marginal cost exceeds marginal benefit.
B) whenever marginal benefit exceeds marginal cost.
C) when marginal benefit equals marginal cost.
D) when the maximum possible quantity is being produced.

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when the marginal benefit of production or consumption is equal to its marginal cost. This means that resources are being used to produce the amount that provides the maximum overall benefit to society. If marginal cost exceeds marginal benefit, then resources are being wasted on producing goods that don't provide enough value to justify the cost. If marginal benefit exceeds marginal cost, then society is missing out on producing goods that provide more value than what it costs to produce them. Therefore, allocative efficiency occurs when marginal benefit equals marginal cost.

Resource Use Is Allocatively Efficient