When a competitive market achieves allocative eﬃciency, it implies that
A) the marginal beneﬁt of having the product is greater than the marginal cost.
B) the buyers are getting the maximum consumer surplus from the product.
C) the combined consumer and producer surplus is maximized.
D) the quantity demanded is lower than the quantity supplied.

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when the market equilibrium quantity is produced and consumed, meaning that the combined consumer and producer surplus is maximized. This is the most efficient use of resources and indicates that the market is producing and selling the optimal amount of the product. A and B are not necessarily true in all cases of allocative efficiency, and D implies a shortage which would not indicate allocative efficiency.

When a Competitive Market Achieves Allocative Eﬃciency, It Implies That