Economics Perfect Competition Questions
Allocative efficiency in perfect competition refers to a situation where resources are allocated in such a way that the production of goods and services is at a level where the marginal benefit equals the marginal cost. In other words, it is a state where the market equilibrium is achieved, and the allocation of resources is optimized to maximize overall welfare. This occurs when firms in perfect competition produce goods and services at the lowest possible cost, and consumers are willing to pay the highest price they are willing and able to afford. Allocative efficiency ensures that resources are not wasted and are used in the most productive manner, leading to an optimal allocation of resources and overall economic efficiency.