An efficient allocation of resources requires that a product's price equal its average cost.

Question

Quizplus · Accepted Answer

An efficient allocation of resources occurs when a product's price equals its marginal cost, not its average cost. When a product's price equals its marginal cost, producers have no incentive to produce more or less than what consumers actually value, leading to an optimal use of resources. A price equal to the average cost may result in profit, but it does not necessarily lead to an efficient allocation of resources.

An Efficient Allocation of Resources Requires That a Product's Price