Allocative efficiency occurs when the
A) minimum of average total cost equals average revenue.
B) minimum of average total cost equals marginal revenue.
C) marginal cost equals the marginal benefit to society.
D) marginal revenue equals marginal benefit to society.

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when marginal cost (MC) equals marginal benefit to society (MB), which means that society is producing and consuming the optimal quantity of a good or service. Option A and B are related to profit maximization for the firm, which may not lead to allocative efficiency. Option D is also not correct, as marginal revenue does not necessarily equal marginal benefit to society.

Allocative Efficiency Occurs When the