In this simplified view, allocative efficiency, which is equivalent to SMB = SMC is also equivalent to P = MC.

Where the supply curve is also the MC curve, P = MC in equilibrium and we will have allocative efficiency. Both technical efficiency and productive efficiency are about minimizing production costs, so the reason we are concerned about those types of efficiency is obvious. The importance of allocative efficiency is not as easily seen, however it is just as important, if not more so. In order to understand why, it's useful to review consumer and producer surplus.

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