A firm is producing an output such that the benefit from one more unit is more than the cost of producing that additional unit. This means the firm is
A) producing more output than allocative efficiency requires.
B) producing less output than allocative efficiency requires.
C) achieving productive efficiency.
D) producing an inefficient output, but we cannot say whether output should be increased or decreased.

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when the benefit from producing one more unit equals the cost of producing it. If the benefit exceeds the cost, the firm is producing less than the allocatively efficient output level.

A Firm Is Producing an Output Such That the Benefit