Resources are efficiently allocated when production occurs at that output level where price
A) equals marginal cost.
B) equals marginal revenue.
C) is greatest over average cost.
D) is equal to average total cost.

Question

Quizplus · Accepted Answer

When production occurs at the output level where price equals marginal cost, it means that the last unit of output produced adds as much value to total revenue as it adds to total cost. Therefore, producing at this level ensures that resources are being allocated efficiently, as any deviation from this level would lead to either underutilization or overutilization of resources, resulting in less optimal allocation.

Resources Are Efficiently Allocated When Production Occurs at That Output