Outline how the relationship between marginal benefit and marginal cost at the new (after-subsid)) equilibrium relates to allocative efficiency (or inefficiency).

## Step 1<br />The concept of allocative efficiency is a fundamental principle in economics. It refers to a state where resources are allocated in a way that maximizes the overall benefit to society. This is achieved when the marginal benefit (MB) equals the marginal cost (MC).<br /><br />## Step 2<br />When a subsidy is introduced, it effectively lowers the cost of production. This shift in cost can lead to a new equilibrium point where the MB is greater than the MC.<br /><br />## Step 3<br />This new equilibrium point, where MB > MC, indicates that the consumer is getting more benefit than the cost of production. This is a sign of allocative inefficiency.<br /><br />## Step 4<br />The reason for this inefficiency is that the price is artificially lowered due to the subsidy. This means that the consumer is getting more benefit than the cost of production, which is not a sign of allocative efficiency.<br /><br />## Step 5<br />In an ideally efficient market, the price should reflect the true cost of production. However, with the introduction of a subsidy, the price is artificially lowered, leading to a situation where the MB > MC, which is a sign of allocative inefficiency.