ECONOMICS
DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Social welfare is maximized.
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Social marginal benefits equals social marginal cost.
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It happens only at market equilibrium where community surplus is maximized.
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All the choices given are valid.
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Detailed explanation-1: -Allocational or allocative, efficiency is a property of an efficient market whereby all goods and services are optimally distributed among buyers in an economy. It occurs when parties are able to use the accurate and readily available data reflected in the market to make decisions about how to utilize their resources.
Detailed explanation-2: -The correct option is: (e) Marginal benefit must equal marginal cost. Explanation: Market output is allocative efficient when marginal cost and marginal benefit are equal at this output level.
Detailed explanation-3: -Which of the following is a characteristic of allocative efficiency? The combination of products society produces are most desired by society.
Detailed explanation-4: -An allocatively efficient economy produces an “optimal mix” of commodities. A firm is allocatively efficient when its price is equal to its marginal costs (that is, P = MC) in a perfect market.