Allocative Efficiency Occurs Whenever

question 2

Multiple Choice

Allocative efficiency occurs whenever

• A) consumer surplus is maximized.
• B) it is impossible to produce a net benefit for society by changing the combination of goods and services produced.
• C) firms have maximized their profits.
• D) it is impossible to make someone in society better off without making someone else worse off.

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Definitions:

Supply-and-Demand

A fundamental economic model that describes how the price and quantity of goods and services are determined in a market based on the amount available (supply) and the desire to purchase (demand).

Equilibrium Output

The level of output where the quantity of goods or services producers are willing to supply equals the quantity consumers are willing to buy, resulting in market equilibrium.

Competitive Firm

A company that operates in a market where there are many buyers and sellers, and it has little control over the market price.

MC Curve

The graphical representation of how the cost to produce an additional unit of a good changes with the production volume.