What is allocative efficiency?

A.It refers to a situation in which resources are allocated such the last unit of output produced provides a marginal benefit to consumers equal to the marginal cost of producing it.

B.It refers to a situation in which resources are allocated to their highest profit use.

C.It refers to a situation in which resources are allocated fairly to all consumers in a society.

D.It refers to a situation in which resources are allocated such that goods can be produced at their lowest possible average cost.

Question

06-04-2020
Business

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What is allocative efficiency?

A.It refers to a situation in which resources are allocated such the last unit of output produced provides a marginal benefit to consumers equal to the marginal cost of producing it.

B.It refers to a situation in which resources are allocated to their highest profit use.

C.It refers to a situation in which resources are allocated fairly to all consumers in a society.

D.It refers to a situation in which resources are allocated such that goods can be produced at their lowest possible average cost.

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Answer: Allocative efficiency is the situation whereby resources are allocated in such a way that the last unit of output that is produced provides a marginal benefit to consumers that is equal to the marginal cost of producing the product. (A)

Explanation:

Allocative efficiency is when production represents the preferences of consumer as every product is produced at the point where the last unit gives a marginal benefit to consumers that is equal to the marginal cost used in producing the product.

Allocative efficiency is the level of output that is achieved when the price of a good or service equates to the marginal cost of production. Allocative efficiency can be achieved when there is an optimal distribution in goods and/or services in response to the demand of consumers and when the marginal cost and the marginwl utility of the product or services are equal.