... / machines / time are needed, increasing the cost. Productive efficiency is also said to occur where MC=AC, as shown on the following graph. Although to achieve full economic efficiency, it is not enough to simply produce goods and services at the lowest possible cost. Allocative efficiency is producing the products that are most wanted by consumers, given their cost of production. For example, two buses, x and y, cost exactly the same amount to produce and run, but bus x gives twice as much satisfaction as bus y. If allocative efficiency is to exist, bus x should be produced and used in preference to bus y. If two methods of transport, train and taxi, yield the same amount of customer satisfaction, but the train costs half as much to ...

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