Which of the following best illustrates an allocational boundary in microeconomics?

• A. The point on a production possibilities frontier where resources are allocated to maximize consumer satisfaction.
• B. The minimum average cost at which a firm can produce any given level of output.
• C. A situation where all individuals in a society have equal income.
• D. The intersection of market demand and supply curves.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of an allocational boundary in microeconomics. It refers to the point or condition where resources are allocated in such a way that maximizes overall economic efficiency or consumer satisfaction.
2. Step 2: Recognize that the Production Possibilities Frontier (PPF) represents the maximum possible output combinations of two goods that an economy can achieve given its resources and technology.
3. Step 3: Identify that the allocational boundary is the point on the PPF where resources are distributed to maximize consumer satisfaction, meaning the economy is producing the optimal mix of goods that consumers desire most.
4. Step 4: Compare this with other options: minimum average cost relates to production efficiency but not directly to allocation for consumer satisfaction; equal income is about distribution, not allocation efficiency; and the intersection of demand and supply curves relates to market equilibrium, not specifically to the allocational boundary concept.
5. Step 5: Conclude that the best illustration of an allocational boundary is the point on the PPF where resources are allocated to maximize consumer satisfaction, as it directly reflects efficient resource allocation in microeconomics.