Where does allocative efficiency occur?
A) where the price of a good is equal to the marginal cost of producing it
B) where the greatest quantity of output is available for sale
C) where the price of a good is greater than the marginal cost of producing it
D) where the price of a good is less than the marginal cost of producing it

Question

Quizplus · Accepted Answer

Allocative efficiency occurs where the price of a good is equal to the marginal cost of producing it. This means that resources are being allocated in a way that maximizes overall welfare in the economy, as there is no other way to produce more of the good without increasing the overall cost. Choices B, C, and D do not necessarily imply allocative efficiency as they do not take into account the cost of production.

Where Does Allocative Efficiency Occur