Figure 12-20

-Refer to Figure 12-20.If the market price is P₁, what is the allocatively efficient output level?

Question

Figure 12-20
 
-Refer to Figure 12-20.If the market price is P₁, what is the allocatively efficient output level?

Quizplus · Accepted Answer

Allocative efficiency occurs when the price equals the marginal cost, which is achieved at the output level Q₁. At Q₂, the marginal cost is greater than the price, indicating an overproduction, and at Q₀, the marginal cost is less than the price, indicating an underproduction. However, at Q₁, the price equals the marginal cost, indicating an efficient allocation of resources.

Figure 12-20 -Refer to Figure 12-20.If the Market Price Is P₁, What