When there is allocative efficiency in a market, the buyers' maximum willingness to pay for the last unit traded is equal to the sellers' minimum acceptable price for that unit.

Question

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Allocative efficiency occurs when the price of the good equals the marginal cost of production, meaning the value consumers place on the last unit purchased (their maximum willingness to pay) is equal to the cost of producing that unit (the sellers' minimum acceptable price). This ensures resources are allocated in the most efficient way, where the quantity of goods produced matches consumer preferences and needs.

When There Is Allocative Efficiency in a Market, the Buyers