The diagram below shows the demand and supply curves in a perfectly competitive market. FIGURE 12-5 -Refer to Figure 12-5.Allocative efficiency occurs A)at output level Q₃. B)at output level Q₁. C)at price P₁ and output Q₃. D)at price P₂ and output Q₂. E)where the areas 1,2,3,and 4 are maximized.

Question

Quizplus · Accepted Answer

Allocative efficiency occurs where the price equals the marginal cost of production, which is typically at price P2 and output Q2 in economic models.

The Diagram Below Shows the Demand and Supply Curves in a Perfectly