What does allocative efficiency mean?
A)That a product is produced where its price is equal to its marginal costs.
B)That a product is produced where its price is below its marginal costs.
C)That a product is produced where its price is equal to its average costs.
D)That a product is produced where its price is below its average costs.

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when resources are allocated in a way that produces the optimal amount of goods and services at the lowest possible cost. This means that a product is produced where its price is equal to its marginal costs, indicating that the resources being used to produce the product are being used efficiently and no other allocation of resources would result in a greater overall benefit to society.

What Does Allocative Efficiency Mean