Question

The general rule for allocating a productive resource efficiently across different production activities of the same product, like fishing boats in the text case example, is to choose the allocation for which the...

a) Marginal cost is lowest
b) Marginal benefit is highest
c) Average cost is highest
d) Total cost is minimized

Answer 1

Allocative efficiency refers to producing the optimal quantity of a good where the marginal benefit to society equals the marginal cost.

Step-by-step explanation:

Allocative efficiency is an economic concept that refers to producing the optimal quantity of a good where the marginal benefit to society of one more unit equals the marginal cost. In a perfectly competitive market, firms maximize their profits by producing at the quantity where price is equal to marginal cost, ensuring that the social benefits of producing the good align with the social costs of production.