Which of the following best describes allocative efficiency?
A) Producing a medical service at the lowest possible cost.
B) Constructing a new medical facility to exactly offset a market shortage of such services.
C) Increasing the amount of hospital beds available such that each person in the population served has a bed allocated to him/her.
D) None of the above.
E) More than one of the above statements is true.

Question

Quizplus · Accepted Answer

Allocative efficiency refers to the optimal allocation of resources to produce the desired outcome. Constructing a new medical facility to exactly offset a market shortage of such services best describes this concept. Option A refers to productive efficiency, which is producing a good/service at the lowest possible cost, and Option C is not allocatively efficient as it does not consider the actual demand for hospital beds. Option D is incorrect as there is at least one correct option.

Which of the Following Best Describes Allocative Efficiency