When a competitive market achieves allocative efficiency, it implies that:
A) The marginal benefit of having the product is greater than the marginal cost
B) The buyers are getting the maximum consumer surplus from the product
C) The combined consumer and producer surplus is maximized
D) The quantity demanded is lower than the quantity supplied

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when the market price is equal to the marginal cost, resulting in the maximization of total surplus (consumer and producer)..Option A refers to consumer surplus, while option B refers to the maximum possible consumer surplus. Option D implies a shortage in the market, which is not allocatively efficient.

When a Competitive Market Achieves Allocative Efficiency, It Implies That