What is the definition of allocative efficiency?
A)all non-value activities performed with minimal quantities needed to produce the given outputs
B)elimination of all non-value-added activities
C)input prices determining the relative proportions of each input that should be used
D)input prices determining the relative proportions of each output that should be produced

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when the combination of inputs used to produce goods and services are in the most economically efficient proportion, which is determined by input prices. Therefore, option C is the correct definition. Options A and B refer to operational efficiency, and option D is incorrect as input prices do not determine the proportions of each output produced.

What Is the Definition of Allocative Efficiency