The figure above shows Kaley's marginal benefit from swimming with manatees and Scott's marginal cost of providing manatee swimming tours. For Kaley and Scott, allocative efficiency is achieved at what point?

Question

BlackTom AI · Accepted Answer

To determine allocative efficiency in this diagram, we need to compare the marginal benefit (MB) Kaley receives from swimming with manatees to Scott's marginal cost (MC) of providing the tours.

Option C represents the point where the two curves intersect. At the intersection, MB equals MC, which is the condition for allocative efficiency in this context: the quantity produced (manatee swims per week) is where the benefit to the consumer equals the cost to the producer, and resources are not over- or under-allocated.

Analyzing the options conceptually:
- If you were to choose a quantity left of the intersection, MB would exceed MC. This means additional tours would add more to Kaley’s benefit than they cost Scott, so increasing production would improve efficiency.
- If you were to choose a quantity right of the intersection, MC would exceed MB. Each additional tour would cost more than the benefit it provides, so reducing production would improve efficiency.
- The intersection point, where MB = MC, is precisely where the net social benefit is maximized and resources are allocated efficiently.

In this graph, the labeled intersection is point C, where the downward-sloping MB line meets the upward-sloping MC line. Therefore, allocative efficiency is achieved at point C.

The figure above shows Kaley's marginal benefit from swimming with manatees and Scott's marginal cost of providing manatee swimming tours. For Kaley and Scott, allocative efficiency is achieved at what point? Single choice

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