An economy will be allocatively efficient if
A)the economy's resources are fully employed.
B)all firms are breaking even.
C)the average cost of production is the lowest possible for all goods produced.
D)price equals marginal cost for all products.
E)the price equals average cost for all goods.

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when the price of a good or service equals its marginal cost, which means that resources are being allocated to their most efficient use. This ensures that the last unit of a good or service produced provides a consumer with a marginal benefit equal to the marginal cost of producing it. Therefore, D is the correct answer.

An Economy Will Be Allocatively Efficient If