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JAMB Economics 1991 Question 16

Question 16

Market Structures

Resources are efficiently allocated when production takes place at that output where price equals

  1. A.marginal revenue
  2. B.average variable cost
  3. C.marginal cost
  4. D.total cost
Show the answer and explanation

Answer: C (marginal cost)

Explanation

Allocative efficiency requires P = MC: the value consumers place on the last unit equals the cost of the resources used to make it.