Question

Economic efficiency is

A. a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.
B. a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is not at a maximum.
C. a government outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.
D. a market outcome in which the marginal benefit to consumers of the last unit produced is greater than its marginal cost of production and in which the sum of consumer surplus and producer surplus is at a maximum.

Answer 1

The correct answer is option A.

Step-by-step explanation:

A market outcome will be considered economically efficient if the marginal benefit earned from the last unit is equal to the marginal cost incurred in the production of the last unit while the economic surplus or the sum of consumer surplus and producer surplus is at maximum.

If the marginal cost and benefit are not equal then the outcome is said to inefficient. It means that either the resources are not being allocated efficiently or the production is not efficient.