Which of the following are the rules for finding the point of allocative efficiency?
A) Produce on the PPF and then produce where the marginal benefit and marginal cost are as large as possible.
B) Produce on the PPF and then produce where marginal benefit equals marginal cost.
C) Produce anywhere on the PPF.
D) Produce on the PPF and then produce where the marginal benefit exceeds marginal cost by as much as possible.
E) Produce on the PPF and then produce where marginal benefit and marginal cost are constant.

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when the output is produced where marginal benefit equals marginal cost. Therefore, the best choice is option B which states to produce on the PPF and then produce where marginal benefit equals marginal cost. Options A, D, and E are incorrect as they do not explicitly state that marginal benefit must equal marginal cost for allocative efficiency to occur. Option C is also incorrect because while producing anywhere on the PPF does mean the production is efficient, it does not guarantee that allocative efficiency is achieved.

Which of the Following Are the Rules for Finding the Point