Resources are efficiently allocated when production occurs where
A) marginal cost equals average variable cost.
B) price is equal to average revenue.
C) price is equal to marginal cost.
D) price is equal to average variable cost.

Question

Quizplus · Accepted Answer

When production occurs where price is equal to marginal cost, it means that the cost of producing each additional unit is equal to the revenue received from selling that additional unit. This is the point of maximum efficiency because resources are being used in the most optimal way possible, generating the most value for every unit produced. At any other point, either there would be wasted resources or the production would not generate enough revenue to cover the costs. Therefore, choice C is the best answer.

Resources Are Efficiently Allocated When Production Occurs Where