The allocatively efficient level of output is the point at which resources are allocated in a way that maximizes society's overall welfare. It occurs when the marginal benefit to society equals the marginal cost.
Imagine you're hosting a pizza party and you have limited resources (pizza ingredients). Allocative efficiency would be achieved when you distribute the pizzas in a way that satisfies everyone's hunger without wasting any ingredients.
Marginal Benefit: The additional benefit gained from consuming one more unit of a good or service.
Marginal Cost: The additional cost incurred from producing one more unit of a good or service.
Social Welfare: The overall well-being or satisfaction of society as a whole.
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