Question

The additional benefit of producing one more roast beef sandwich at a local deli is $2. The additional cost of producing one more roast beef sandwich is $3. To improve allocative efficiency:

Answer 1

Answer:

Not produce any additional roast beef sandwich

Explanation:

Allocative efficiency is reached when the marginal benefit or producing one more unit of output equals the marginal cost.

Allocative efficiency - Marginal Benefit (MB) = Marginal Cost (MC)

For this local deli, producing one more roast beef sandwich has a marginal benefit of $2, and a marginal cost of $3, we have:

MB = MC

$2 = $3

For the local deli, in this situation there is no allocative efficiency because the marginal cost is higher than the marginal benefit, therefore, the firm should not produce any additional roast beef sandwiches.