Asked by Aspen Arellano on Jun 10, 2024
Verified
A firm is producing an output such that the benefit from one more unit is more than the cost of producing that additional unit.This means the firm is:
A) producing more output than allocative efficiency requires.
B) producing less output than allocative efficiency requires.
C) achieving productive efficiency.
D) producing an inefficient output,but we cannot say whether output should be increased or decreased.
Allocative Efficiency
A state of resource allocation where it is impossible to make any one individual better off without making at least one individual worse off, typically achieved when the economy effectively allocates resources to where they are most valued.
Productive Efficiency
A scenario where goods or services are produced at the lowest possible cost, often involving optimal utilization of resources.
- Understand the concept of allocative and productive efficiency in economic production.
- Explain the implications of marginal cost pricing for resource allocation and firm profitability.
Verified Answer
CP
Colton PalmerJun 11, 2024
Final Answer :
B
Explanation :
Allocative efficiency occurs when the marginal benefit of producing one more unit equals the marginal cost. If the benefit of producing one more unit exceeds the cost, the firm is producing less than the allocatively efficient quantity.
Learning Objectives
- Understand the concept of allocative and productive efficiency in economic production.
- Explain the implications of marginal cost pricing for resource allocation and firm profitability.