An economy will be allocatively efficient if
A) the economy's resources are fully employed.
B) the price equals average cost for all goods.
C) price equals marginal cost for all products.
D) the average cost of production is the lowest possible for all goods produced.
E) all firms are breaking even.

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when price equals marginal cost for all products. This means that resources are being allocated to produce goods and services that are valued the same as the resources used to produce them. This results in a situation where any further reallocation of resources would lead to a reduction in overall welfare.

An Economy Will Be Allocatively Efficient If