At the output level deﬁning allocative eﬃciency,
A) the areas of consumer and producer surplus necessarily are equal.
B) marginal beneﬁt exceeds marginal cost by the greatest amount.
C) consumer surplus exceeds producer surplus by the greatest amount.
D) the maximum willingness to pay for the last unit of output equals the minimum acceptable price of that unit of output.

Question

Quizplus · Accepted Answer

Allocative efficiency is achieved when the last unit of output produced provides the maximum willingness to pay for the consumers and is produced at a price that represents the minimum acceptable price for the producers. Therefore, the maximum willingness to pay for the last unit of output must equal the minimum acceptable price of that unit of output, which is option D. Options A, B, and C are not necessarily true for allocative efficiency to be achieved.

At the Output Level Deﬁning Allocative Eﬃciency