Asked by Adrian Batista on May 16, 2024
Verified
Resources are efficiently allocated when production occurs at that output at which
A) P equals MR.
B) P equals AVC.
C) P exceeds MR.
D) P equals MC.
Marginal Revenue
The extra revenue a company earns by selling an additional unit of a product or service.
Output Level
The quantity of goods or services produced by a business, industry, or economy at a given time.
- Elucidate why the equivalence of price and marginal cost is crucial for the efficacious allocation of resources.
Verified Answer
JP
Joshivel PeruchoMay 20, 2024
Final Answer :
D
Explanation :
Resources are efficiently allocated when the price (P) equals the marginal cost (MC) of production. This condition ensures that the value consumers place on a good is equal to the cost of producing an additional unit, leading to an optimal allocation of resources.
Learning Objectives
- Elucidate why the equivalence of price and marginal cost is crucial for the efficacious allocation of resources.
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