Allocative efficiency occurs when:
A)marginal social utility equals marginal social cost.
B)all industries are monopolized.
C)all externalities are eliminated.
D)marginal social cost equals the minimum of average social cost.
E)marginal social cost equals average social cost, though not necessarily at the minimum of average social cost.

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when the marginal social utility (benefit to society) of a good or service equals its marginal social cost (cost to society). This means that resources are being allocated efficiently to produce the goods and services that society values the most. None of the other choices accurately define allocative efficiency.

Allocative Efficiency Occurs When