In a monopoly, allocative efficiency is achieved when the price set by the monopolist equals the marginal cost of production, leading to zero deadweight loss for society.

Allocative efficiency in a monopoly happens when the price that the monopolist charges for their product is equal to the cost of making one more unit, known as marginal cost. This means that the resources used to produce the product are being used in the best way possible, as the price reflects the value to consumers. When this balance is achieved, there is no deadweight loss, which means that no potential sales are lost, and both consumers and producers benefit fully. For example, if a monopolist sells a toy for $10 and it costs them $10 to make each additional toy, they are being allocatively efficient. This situation maximizes overall happiness in the market, as everyone who wants the toy at that price can buy it without any waste of resources.