Is there still allocative efficiency when a subsidy is placed on a good?
allocative efficiency occurs whenever total market surplus is maximized. This occurs whenever price is equal to the ‘free market’ equilibrium price. There is no surplus of goods at this equilibrium price. There is no DWL at this equilibrium. If there exists DWL, the market is not operating at the 'free market' (as phrased in a comment below) or the ‘unfettered’ equilibrium and the market is not allocatively efficient. To be clear, this market will still operate at some equilibrium. However, this equilibrium will not be efficient.