Refer to the above graph. If the output level is Q₂, then there will be: A) Allocative efficiency B) Maximum deadweight losses C) Maximum consumer surplus D) Greater marginal benefits than marginal costs of the product

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when marginal benefit equals marginal cost, which is the case at output level Q₂ on the graph. At this output level, resources are being allocated in the most efficient way possible, maximizing total surplus in the market. Therefore, choice A is the best answer.

Refer to the Above Graph