Principles of Microeconomics / Unit 7 MIC 0635 short lesson, about 20 seconds
Allocative Efficiency: P = MC
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The idea
Allocative efficiency means producing the quantity society values most: where price, the last unit's worth to a buyer, equals marginal cost. Competition delivers it, since each firm produces to price equals marginal cost.
In practice
The last flat is worth what it took to grow.
Where people slip
Below that quantity a unit worth more than its cost goes unmade; above it, one costing more gets made.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
Builds on
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