What is the level of output where marginal cost equals average revenue called?

The level of output where marginal cost equals average revenue is referred to as allocative efficiency. In this scenario, resources are distributed in such a way that the value consumers place on the last unit produced (reflected in average revenue) matches the cost of resources required to produce that unit (reflected in marginal cost). This point indicates that the firm is maximizing its "welfare" for both producers and consumers, as no further gains can be made without creating a loss for one party or the other.

Allocative efficiency implies that the price of the good (which reflects the average revenue) is equal to the marginal cost of producing that good. At this output level, the society's resources are being utilized optimally to produce goods that are valued most highly by consumers, ensuring that no additional production would increase overall utility.

In contrast, the other options do not directly relate to the situation described. Normal profits refer to the situation where total revenue equals total costs, including opportunity costs, which does not specifically address the relationship between marginal cost and average revenue. Marginal revenue refers to the additional revenue generated from selling one more unit of a good, while productive efficiency relates to the lowest point of average cost, ensuring that goods are produced at the lowest possible cost,