Question

If for a business P=minimum(ATC)=MC, this means that:

Group of answer choices:

A. both allocative efficiency and productive efficiency are being attained

B. allocative efficiency is being achieved, but productive efficiency is not

C. neither allocative nor productive efficiency is being achieved

D. productive efficiency is being achieved, but allocative efficiency is not

Answer 1

The point where P = minimum(ATC) = MC for a business indicates that the business is achieving both productive efficiency and allocative efficiency, characteristic of a perfectly competitive market in long-run equilibrium.

Step-by-step explanation:

The condition where P = minimum(ATC) = MC signifies a point of both productive efficiency and allocative efficiency. Productive efficiency is achieved when goods cannot be produced at a lower cost, i.e., when average total costs (ATC) are minimized. This is also where MC (marginal cost) intersects ATC. On the other hand, allocative efficiency occurs when the mix of goods being produced represents the allocation that society most desires, which is at the point where price (P) equals marginal cost (MC). Thus, the condition given in the question indicates the business is operating at a point where it is achieving both productive and allocative efficiency as seen in a perfectly competitive market structure in long-run equilibrium.