Question

When a competitive market achieves allocative efficiency, what does it imply?

1) There is no deadweight loss
2) There is no consumer surplus
3) There is no producer surplus
4) There is no economic profit

Answer 1

In a perfectly competitive market, allocative efficiency means there is no deadweight loss.

Step-by-step explanation:

In a perfectly competitive market, when allocative efficiency is achieved, it implies that there is no deadweight loss. Allocative efficiency occurs when resources are allocated to their best alternative use and the chosen production level is socially preferred. In this case, the market price is equal to the marginal cost of production, ensuring that the social benefits received from producing a good are in line with the social costs.