For allocative efficiency to hold
A)price must equal marginal revenue of the last unit sold.
B)price must equal the marginal cost of the last unit produced.
C)average variable cost is minimized in production.
D)average total cost is minimized in production.

Question

Quizplus · Accepted Answer

Allocative efficiency requires that production is at the point where marginal cost equals marginal revenue, which ensures that the price of the last unit produced is equal to the cost of producing that unit. Therefore, choice B is correct as it states that price must equal the marginal cost of the last unit produced. Choices A, C, and D may be important factors in other forms of efficiency but are not necessary for allocative efficiency to hold.

For Allocative Efficiency to Hold