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An allocatively efficient outcome is a situation where the current combination of goods produced and sold gives the maximum satisfaction. Allocative efficiency is achieved when the cost of producing a good is equal to the value consumers place on that good, which is reflected in the price they are willing to pay. It occurs when P = MC. Productive efficiency on the other hand is a situation where firms are producing the maximum output for a given quantity of inputs or producing a given output at lowest cost. Productive efficiency is achieved when production takes place at the lowest possible average cost. It occurs when AC are minimised.
marlinbito answered the question on July 8, 2018 at 18:45
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