Allocative efficiency occurs when
A)producer surplus is maximized.
B)consumer surplus is maximized.
C)the sum of consumer and producer surplus is maximized.
D)the economy achieves the frontier of the production possibilities boundary.
E)deadweight loss is achieved.

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when the sum of consumer and producer surplus is maximized. This means that resources are being allocated in a way that maximizes the total benefit to society, which is achieved when the value that consumers place on the goods or services (measured by their willingness to pay) is equal to the cost of producing those goods or services. Allocative efficiency is one of the key goals of a well-functioning market economy.

Allocative Efficiency Occurs When