When the marginal beneﬁts exceed the marginal costs of producing a product, then allocative
eﬃciency is not achieved in the market.

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when the production of a product results in marginal benefits equaling marginal costs. If marginal benefits exceed marginal costs, then resources are being under-allocated towards the production of that product, indicating that allocative efficiency is not being achieved in the market.

When the Marginal Beneﬁts Exceed the Marginal Costs of Producing