An allocation satisfies the output efficiency condition if
A) For every pair of goods, every input's marginal product equals the marginal rate of transformation
B) For every pair of goods, every consumer's marginal rate of substitution equals the marginal rate of transformation
C) Only applies for firms that produce the same product
D) Only applies for consumers that consume the same goods

Question

Quizplus · Accepted Answer

Output efficiency refers to production efficiency, meaning that firms are producing the goods and services that consumers want at the lowest possible cost. This requires that the marginal rate of transformation (MRT) of inputs into outputs is equal to the marginal rate of substitution (MRS) between goods for all consumers. Therefore, only choice B accurately describes the output efficiency condition.

An Allocation Satisfies the Output Efficiency Condition If