Allocative efficiency is achieved when the production is such that
A) the marginal benefit exceeds the marginal cost by as much as possible.
B) marginal cost equals zero.
C) marginal benefit is equal to marginal cost.
D) the production point is on the PPF.
E) None of the above is true.

Question

Quizplus · Accepted Answer

Allocative efficiency is achieved when marginal benefit (MB) is equal to marginal cost (MC). This means that the last unit produced provides the same level of satisfaction to consumers as the resources required to produce it. At this point, resources are being allocated efficiently because no further gains can be made by reallocating resources to either increase production or decrease it.

Allocative Efficiency Is Achieved When the Production Is Such That