An equilibrium in which scarce societal resources are allocated to the production of various goods and services up to the point where the cost of the resources equals the benefit society reaps form their use is:
A) productive efficiency.
B) allocative efficiency.
C) true efficiency.
D) product efficiency.

Question

Quizplus · Accepted Answer

Allocative efficiency is the equilibrium in which resources are allocated to the production of goods and services in a way that maximizes the overall benefit to society. This occurs when the marginal cost of producing a good or service equals the marginal benefit to society of producing that good or service, resulting in the production of the optimal quantity of each good or service. Productive efficiency, on the other hand, is achieved when goods and services are produced at the lowest possible cost. While closely related, these concepts are distinct, and the most appropriate answer is B.

An Equilibrium in Which Scarce Societal Resources Are Allocated to the Production