Asked by Wendy Reynoso on May 16, 2024
Verified
The term allocative efficiency refers to:
A) the level of output that coincides with the intersection of the MC and AVC curves.
B) minimization of the AFC in the production of any good.
C) the production of the product mix most desired by consumers.
D) the production of a good at the lowest average total cost.
Allocative Efficiency
An economic state where resources are allocated in a way that maximizes the overall utility to society, ensuring that the goods and services produced match consumer preferences.
Minimization
The process or strategy of reducing or keeping to a minimum the size, amount, or degree of something, especially costs or liabilities.
Product Mix
The total range of products or services offered by a company to its customers.
- Acquire an understanding of the notion of allocative efficiency and its importance in the context of pure competition.
Verified Answer
JS
Jasmine SantanaMay 18, 2024
Final Answer :
C
Explanation :
Allocative efficiency refers to producing the product mix that is most desired by consumers, indicating that resources are being allocated in the most efficient way possible. This occurs when resources are allocated in a way that maximizes total welfare or consumer surplus. A production level that minimizes costs or coincides with the intersection of MC and AVC curves (A), or a production level at the lowest ATC (D) may not necessarily result in producing the product mix most desired by consumers. Minimization of AFC (B) is not related to allocative efficiency.
Learning Objectives
- Acquire an understanding of the notion of allocative efficiency and its importance in the context of pure competition.