In order for a policy option to achieve allocative efficiency,
A) PVNB must be maximized
B) PVB must be minimized
C) PVC must be minimized
D) (PVB - PVC) must be minimized

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when the value consumers place on a good or service (PVNB) equals the cost of producing it (PVC). Therefore, to achieve allocative efficiency, policy options should aim to maximize PVNB.

In Order for a Policy Option to Achieve Allocative Efficiency