For allocative efficiency to hold,
A) price must equal marginal revenue of the last unit sold.
B) price must equal the marginal cost of the last unit produced.
C) average variable cost is minimised in production.
D) average total cost is minimised in production.

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when the price of a good equals the marginal cost of producing it. This ensures that resources are allocated in a way that maximizes social welfare by producing goods at the lowest possible cost, while also ensuring that the goods produced are those most valued by consumers. Therefore, choice B is the correct answer. Choices A, C, and D are not necessarily indicators of allocative efficiency.

For Allocative Efficiency to Hold