Pencil production is efficient if the marginal a pencil equals the marginal

benefit, cost

Explanation: Marginal benefit refer to the additional revenue generated from the production and sale of an additional unit of a good. While, marginal benefit refer to the increase in cost of production when one more unit of a good is produced.

Allocation of resources is efficient when the marginal benefits derived from production of a good is equal to the marginal cost of it. If marginal benefit is less than marginal cost then it will profit firms to produce and sell less units and reduce their losses. While, if marginal benefits are more than the marginal cost then it will be benefit firms to sell more units and increase profits.

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