Allocative efficiency occurs only at that output where:

• A. average total cost is minimized
• B. total revenue equals total cost
• C. marginal cost equals average variable cost
• D. marginal benefit equals marginal cost

Answer: (D)

Verified step by step guidance

1. Understand the concept of allocative efficiency: it occurs when the resources in an economy are distributed in a way that maximizes total social welfare, meaning the goods produced are exactly those most desired by society.
2. Recall that allocative efficiency is achieved when the marginal benefit (MB) to consumers equals the marginal cost (MC) of production, because this balance ensures that the value consumers place on the last unit produced matches the cost of producing it.
3. Recognize that average total cost minimization relates to productive efficiency, not allocative efficiency, as it focuses on producing at the lowest possible cost per unit rather than matching supply with demand preferences.
4. Note that total revenue equaling total cost indicates a break-even point but does not guarantee allocative efficiency, since it does not consider consumer valuation of the product.
5. Understand that marginal cost equaling average variable cost is a cost condition and does not reflect the balance between consumer benefit and production cost necessary for allocative efficiency.