TutorOn by Sanath Withanage

Question:

The allocatively efficient point on a production possibilities curve is achieved where
(1) the minimum quantity of inputs are used to produce each good.
(2) each good is produced at a level where marginal benefits equal marginal cost.
(3) large amounts of capital goods are produced relative to consumer goods.
(4) large amounts of consumer goods are produced relative to capital goods.
(5) each good is produced at a level where price of the good exceeds marginal benefits.

Correct Answer:

(2)

Answer Explanation:

Allocative efficiency occurs when resources are distributed to produce the exact combination of goods and services most highly valued by society. This is achieved at the output level where the Marginal Benefit (MB) of consumption exactly equals the Marginal Cost (MC) of production.

Topic: Economic Efficiency Year: 2020