Question

In perfect competition if firms produce where P=MC they ensure ________ because the social benefits of production as measured by the price that people are willing to pay, are in balance with the ________ to society of that production.

Group of answer choices:
economic efficiency : total revenues
allocative efficiency : marginal costs
economic efficiency : marginal revenues
allocative efficiency : costs

Answer 1

Allocative efficiency: Cost

Step-by-step explanation:

Because allocative efficiency occurs when price equals marginal cost

If a firm produces at P= Mc then they certify allocative efficiency

Answer 2

The correct choice is allocative efficiency : marginal costs

Step-by-step explanation:

In perfect competition if firms produce where P=MC they ensure allocative efficiency because the social benefits of production as measured by the price that people are willing to pay, are in balance with the Marginal costs to society of that production.

Perfect competition calls for allocative efficiency.

Allocative efficiency is a state of the economy in which production represents consumer preferences. That means every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing.