A country produces only pencils and erasers. Pencil production is allocatively efficient if the marginal ________ of a pencil equals the marginal ________ of ________.

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when the marginal benefit of a product equals its marginal cost, indicating that resources are being allocated in the most efficient way to meet the preferences of consumers. In this case, for pencil production to be allocatively efficient, the marginal benefit of a pencil must equal the marginal cost of producing a pencil.

A Country Produces Only Pencils and Erasers