We allocate resources efficiently when
A) marginal benefit is equal to marginal cost.
B) marginal benefit is greater than marginal cost by any amount.
C) marginal cost is greater than marginal benefit.
D) total benefit is greater than total cost.
E) marginal benefit is greater than marginal cost by as much as possible.

Question

Quizplus · Accepted Answer

Allocating resources efficiently means producing up to the point where the marginal benefit equals the marginal cost. This ensures that the last unit produced provides the same benefits as the cost incurred in producing it. Any level of production beyond this point would result in marginal costs exceeding marginal benefits, resulting in a net reduction in social welfare. Therefore, choice A is the best answer.

We Allocate Resources Efficiently When