Allocative Efficiency Occurs Where

question 120

Multiple Choice

Allocative efficiency occurs where:

• A)the price of a good is less than the marginal cost of producing it.
• B)the price of a good is greater than the marginal cost of producing it.
• C)the price of a good is equal to the marginal cost of producing it.
• D)the greatest quantity of output is available for sale.
• E)the price of a good equals the average variable cost of producing it.

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Definitions:

Idle Capacity

The unused portion of a company's production or service potential, often resulting in inefficiencies and increased costs.

Activity-Based Costing

A costing method that assigns costs to products or services based on the activities they require, aiming to provide more accurate product cost information.

Machine-Hours

A unit of measure representing the operating time of a machine, used in allocating costs to products based on machine usage.

First Stage Allocations

In managerial accounting, it refers to the process of allocating overhead costs initially to various departments or cost pools.