Day: April 1, 2019

An economy is allocatively efficient when?

Select ONE answer:

1. the marginal private benefit of consumption equals the marginal social benefit
2. the output produced maximises total consumer welfare
3. there is neither unemployment nor underemployment of factors of production
4. total consumer surplus is exactly equal to total producer surplus

Show your workings to arrive at your answer, and explain and justify your reasons:……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple choice question is suitable for Economics KS5 classes.

The answer is 2

1. Incorrect (ignores production).
2. Correct: This is a statement which reflects what is meant by allocative efficiency.
3. Incorrect refers to technical productive efficiency.
4. Incorrect, simply untrue.

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