Resources are efficiently allocated when production occurs at that output at which
A) P equals MR.
B) P equals AVC.
C) P exceeds MR.
D) P equals MC.

Question

Quizplus · Accepted Answer

Production is efficiently allocated when the price (P) equals the marginal cost (MC) because this ensures that the last unit produced adds exactly as much value as its cost. At this point, the surplus between price and AVC is maximized, meaning that resources are being allocated in the most efficient way possible.

Resources Are Efficiently Allocated When Production Occurs at That Output