Question

At the level of the industry, the condition for productive efficiency is that

A)MRP=P for all inputs.
B)MC=P for all goods.
C)goods are allocated equitably.
D)there are no idle resources in the industry.
E)MC is equal for all firms in the industry.

Answer 1

Productive efficiency at the industry level is achieved when the Marginal Cost (MC) is equal to the Price (P) for all goods, which ensures that resources are used most efficiently in production.

Step-by-step explanation:

The condition for productive efficiency in an industry is that Marginal Cost (MC) is equal to the Price (P) for all goods. This is given by option B) MC=P for all goods. When perfectly competitive firms maximize their profits by producing the quantity where P = MC, they also ensure that the benefits to consumers of what they are buying, as measured by the price they are willing to pay, is equal to the costs to society of producing the marginal units, as measured by the marginal costs the firm must pay. This condition leads to productive efficiency because it implies that firms cannot produce more of one good without increasing costs, and it ensures that resources are used most efficiently in producing the goods. Additionally, this scenario supports allocative efficiency, where the mix of goods being produced represents the allocation that society most desires.