Which of the following conditions does not need to occur for a market to achieve allocative efficiency?
A) Consumers' maximum willingness to pay equals producers' minimum acceptable price.
B) The sum of producer and consumer surplus is maximized.
C) The total revenue received by producers equals the total cost of production.
D) The marginal benefit of the last unit produced equals the marginal cost of producing that unit.

Question

Quizplus · Accepted Answer

While it is important for producers to earn enough revenue to cover their costs, it is possible for a market to achieve allocative efficiency even if total revenue does not equal total cost. Allocative efficiency simply means that resources are allocated in the most socially beneficial way, which can occur as long as the marginal benefit of the last unit produced equals the marginal cost of producing that unit. Therefore, choice C does not necessarily need to occur for allocative efficiency to be achieved.

Which of the Following Conditions Does Not Need to Occur