When a society achieves allocative efficiency,it
A) is not achieving production efficiency.
B) is producing that combination of goods and services that society values most highly.
C) might or it might not be producing at a point on society's PPF.
D) is producing a combination of goods and services whose marginal cost exceeds their marginal benefit.
E) is producing the combination of goods and services for which marginal benefit exceeds marginal cost by as much as possible.

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when resources are allocated in a way that maximizes society's happiness or well-being. This means that the combination of goods and services produced is the one that society values the most, regardless of whether production is happening at a point on the PPF or not. It is possible to achieve allocative efficiency without achieving production efficiency, and allocative efficiency requires that marginal benefit equal marginal cost, so it cannot occur when marginal cost exceeds marginal benefit as stated in option D. Option E is close to the correct answer, but not entirely precise, as allocative efficiency is achieved when society values are optimized, not maximized to the fullest extent possible.

When a Society Achieves Allocative Efficiency,it