The term allocative efficiency refers to
A) the level of output that coincides with the intersection of the MC and AVC curves.
B) minimization of the AFC in the production of any good.
C) the production of the product mix most desired by consumers.
D) the production of a good at the lowest average total cost.

Question

Quizplus · Accepted Answer

Allocative efficiency refers to producing the product mix that is most desired by consumers, which means that the goods and services produced are the ones that consumers value most highly relative to their cost of production. This occurs at the point where marginal cost (MC) equals marginal benefit (MB), which is the optimal production level from society's point of view. On the other hand, A, B, and D are incorrect because minimizing the AFC does not ensure allocative efficiency, and producing at the lowest average total cost or at the intersection of the MC and AVC curves does not necessarily lead to the production of the most desired product mix.

The Term Allocative Efficiency Refers to