ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -2. Allocative efficiency occurs when marginal social benefits are equal to marginal social costs.

Detailed explanation-2: -For efficient consumption of a public resource, the marginal social benefit must be equal to its marginal social cost. Therefore, the marginal social benefit of a common resource is usually the combined sum of marginal benefits of every consumer at each quantity of good consumed.

Detailed explanation-3: -The marginal benefit rule tells us that we can maximize the net benefit of any activity by choosing the quantity at which marginal benefit equals marginal cost. At this quantity, the net benefit of the activity is maximized.

Detailed explanation-4: -Allocative efficiency is the level of output where marginal cost is as close as possible to the marginal benefits. It means that the price of the product or service is close to the marginal benefit that one gets from using that product or service.

Detailed explanation-5: -When a purely competitive industry is in a long-run equilibrium, quantity supplied equals quantity demanded (this is the profit maximizing quantity) AND therefore marginal social cost equals marginal social benefit (MSC = MSB), this is the allocatively efficient quantity.