Allocative efficiency occurs when
A) the sum of consumer and producer surplus is maximized.
B) deadweight loss is achieved.
C) the economy achieves the frontier of the production possibilities boundary.
D) producer surplus is maximized.
E) consumer surplus is maximized.

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when the sum of consumer and producer surplus is maximized, meaning that resources are being allocated to produce the goods and services that are most desired and valued by society. This leads to a situation where the benefits of production are greater than the costs, resulting in the greatest possible overall welfare for society.

Allocative Efficiency Occurs When