Question

Allocative efficiency is achieved when:____.a. there are no shortages or surpluses in the market. b. goods and services are fairly distributed among consumers in an economy. c. firms produce goods and services at the lowest cost. d. firms produce the goods and services that consumers value most.

Answer 1

Answer:

The correct answer is the option A: there are no shortages or surpluses in the market.

Explanation:

To begin with, the concept known as "Allocative Efficiency" in the microeconomics theory refers to the state where all the goods and services that are offered by the suppliers are all consumed by the buyers at the market and therefore that there are no shortages or surpluses in there. Moreover, this theory represents the situation where the last unit produced by the suppliers provides a marginal benefit to the consumers that equals to the marginal cost of producing that last unit. So that is why that is achieved when the market is empty.