Asked by Renee Jackson on Jul 15, 2024
Verified
If for a firm P = minimum ATC = MC, then
A) neither allocative efficiency nor productive efficiency is being achieved.
B) productive efficiency is being achieved, but allocative efficiency is not.
C) both allocative efficiency and productive efficiency are being achieved.
D) allocative efficiency is being achieved, but productive efficiency is not.
Productive Efficiency
A situation in which an economy or entity is producing goods and services at the lowest possible cost, utilizing all its resources efficiently.
Allocative Efficiency
A state of resource allocation where goods and services are distributed according to consumer preferences, with each good produced up to the point where the last unit provides a level of utility equal to its cost of production.
- Familiarize yourself with the concepts of allocative and productive efficiency in the context of market structures.
- Comprehend the function of marginal cost, average total cost, and price in securing productive and allocative efficiency.
Verified Answer
LT
Lauren TurnerJul 19, 2024
Final Answer :
C
Explanation :
When P = minimum ATC = MC, the firm is achieving both productive efficiency (because it is producing at the lowest average total cost) and allocative efficiency (because the price equals the marginal cost, indicating that resources are allocated in a way that the value consumers place on a good is equal to the cost of producing it).
Learning Objectives
- Familiarize yourself with the concepts of allocative and productive efficiency in the context of market structures.
- Comprehend the function of marginal cost, average total cost, and price in securing productive and allocative efficiency.