3.4 Flashcards
1
Q
allocative efficiency
A
Some firms, particularly nationalised industries, aim to maximise social welfare by producing where the value society places on the good equals the extra cost of producing that good (MC=AR).
Key Points:
Achieved when resources are allocated to produce the quantity of goods/services most valued by society.
Example: A nationalised industry may set prices to reflect the marginal cost of production, ensuring that goods are affordable and accessible.
