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Question
Microeconomics
Posted about 2 months ago

If a market is allocatively efficient, what must be true?
Choose 1 answer:
(A) The price of a good equals the marginal cost of the last item produced.
(B) Price is greater than the average total cost of the last item produced.
(C) Total revenue is less than the total cost
(D) Price equals the minimum average total cost.
(E) Marginal revenue equals marginal cost.
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Answer from Sia
Posted about 2 months ago
Solution
a
Allocative Efficiency: Allocative efficiency occurs when the price of a good equals the marginal cost (MC) of producing the last unit. This ensures that resources are allocated in a way that maximizes total surplus in the market
b
Correct Answer: The correct answer is (A) "The price of a good equals the marginal cost of the last item produced." This is because, in an allocatively efficient market, the price consumers are willing to pay (which reflects the marginal benefit) equals the marginal cost of production
Answer
(A) The price of a good equals the marginal cost of the last item produced.
Key Concept
Allocative Efficiency
Explanation
Allocative efficiency is achieved when the price of a good equals the marginal cost of producing the last unit, ensuring that resources are used in a way that maximizes total surplus.

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