What is allocative efficiency?
A) It refers to a situation in which resources are allocated such that the last unit of output produced provides a marginal benefit to consumers equal to the marginal cost of producing it.
B) It refers to a situation in which resources are allocated to their highest profit use.
C) It refers to a situation in which resources are allocated such that goods can be produced at their lowest possible average cost.
D) It refers to a situation in which resources are allocated fairly to all consumers in a society.
A
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The marginal product of labor (measured in units of output) of a firm is given by MPN = A(2000 - N)
where A measures productivity and N is the number of labor hours used in production. Suppose the price of output is $6 per unit and A = 0.002. (a) What will be the demand for labor if the nominal wage is $18? (b) What will be the demand for labor if the nominal wage rises to $21?
Monopolistically competitive firms engage in advertising to increase market share and make demand more inelastic
Indicate whether the statement is true or false