Allocative Efficiency Occurs When It Is

question 208

Multiple Choice

Allocative efficiency occurs when it is

• A) possible to produce more of one good without giving up the production of some other good.
• B) possible to produce more of all goods.
• C) not possible to produce more of one good without giving up the production of some other good that is valued less highly.
• D) not possible to produce more of one good without giving up the production of some other good that is valued more highly.

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Definitions:

Private Value

The valuation of a good or service to an individual or entity, reflecting personal utility rather than market or societal value.

Market Equilibrium

The state in a market where the quantity demanded equals the quantity supplied, leading to a stable price level for goods or services.

Total Surplus

The sum of consumer surplus and producer surplus, representing the total benefit to society from the production and sale of a good or service.

External Benefits

Positive effects of a production or consumption activity on third parties not directly involved in the transaction, leading to social or economic benefits.