Which of the following is necessary for allocative efficiency to be achieved?
A) The difference between marginal benefit and marginal cost must be maximised.
B) Production must be at a point inside the production possibilities frontier.
C) Marginal benefit must be maximised.
D) Marginal benefit must equal marginal cost.
E) Marginal cost must be minimised.

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when marginal benefit (MB) equals marginal cost (MC). This is because at this point, the value to society of producing an additional unit (MB) is exactly equal to the cost of producing that unit (MC), ensuring that resources are allocated efficiently.

Which of the Following Is Necessary for Allocative Efficiency to Be