Economics Perfect Competition Questions
Allocative efficiency in oligopoly refers to the situation where resources are allocated in a way that maximizes social welfare or overall societal benefit. In this context, it means that the production and distribution of goods and services by oligopolistic firms are done in a manner that achieves the optimal allocation of resources. This occurs when the firms in an oligopoly produce at the point where marginal cost equals marginal revenue, resulting in the most efficient use of resources and the maximization of consumer surplus. Allocative efficiency in oligopoly is important as it ensures that resources are not wasted and that consumer demand is met at the lowest possible cost.