In order to assure allocative efficiency,
A)people's marginal rate of substitution must equal the economy's rate of product transformation.
B)people's marginal rate of substitution must equal the firm's rate of technical substitution among inputs.
C)a firm's rate of technical substitution must equal the economy's rate of product transformation.
D)all of the other answers are correct.

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when the marginal rate of substitution (MRS) between two goods for consumers equals the marginal rate of transformation (MRT) in production, ensuring resources are allocated to maximize overall satisfaction.

In Order to Assure Allocative Efficiency