When there is allocative eﬃciency in a market, the buyers' maximum willingness to pay for the last
unit traded is equal to the sellers' minimum acceptable price for that unit.

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when resources are distributed in a way that maximizes societal welfare. In a market with allocative efficiency, the price of a good or service reflects its marginal cost and the quantity produced is where the marginal cost and marginal benefit intersect. At this point, the buyers' maximum willingness to pay for the last unit is equal to the sellers' minimum acceptable price, resulting in an efficient allocation of resources.

When There Is Allocative Eﬃciency in a Market, the Buyers