The optimal allocation of resources occurs when:

• A. all goods are produced at the lowest possible average cost
• B. income is distributed equally among all individuals
• C. the government sets prices for all goods and services
• D. resources are distributed so that marginal benefit equals marginal cost

Answer: (D)

Verified step by step guidance

1. Understand the concept of optimal allocation of resources in microeconomics, which refers to the most efficient distribution of resources to maximize overall welfare.
2. Recall that optimal allocation occurs when the marginal benefit (MB) of producing or consuming a good equals the marginal cost (MC) of producing that good, ensuring no resources are wasted or underutilized.
3. Recognize that producing all goods at the lowest average cost relates to productive efficiency, but does not guarantee optimal allocation since it ignores consumer preferences and marginal benefits.
4. Note that equal income distribution or government price setting are policy choices that do not necessarily lead to optimal resource allocation from an economic efficiency perspective.
5. Conclude that the condition for optimal allocation is when \(\text{MB} = \text{MC}\), meaning resources are allocated where the additional benefit of one more unit equals the additional cost of producing it.