MARK 4500 Lecture Notes - Lecture 9: Allocative Efficiency, Marginal Utility, Marginal Cost
8 Mar 2018
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Document Summary
Allocative efficiency is a situation in which the quantities of goods and services are those that people value most highly. It is not possible to produce more of one good or service without producing less of something else. Ex: if the state government has allocated its budget to various programs efficiently, then in order to provide more money to one program, they would have to take money away from another program. Marginal benefit is the benefit that a person receives from consuming one more unit of a good or service in the same sitting (at the same time) Marginal cost is the opportunity cost of producing one more unit of a good or service. The marginal cost of producing a good increases as more of the good is produced. The marginal cost exchange rate shows the amount of other goods and services that we must give up to produce one more unit of the good or service being produced.
