In the long run, a perfectly competitive industry is allocatively efficient because
A)the opportunity cost of resources needed to produce the last unit of output just equals the marginal value to consumers of the last unit
B)it maximizes producer surplus
C)consumer surplus could be larger if the price were lower
D)production occurs at the lowest average total cost
E)marginal costs are low

Question

Quizplus · Accepted Answer

Allocative efficiency occurs when the marginal benefit to consumers equals the marginal cost of production (which is equal to the opportunity cost of resources used in production). In a perfectly competitive market, producers cannot charge a price higher than the equilibrium price determined by the intersection of the demand and supply curves, and therefore, resources are allocated efficiently towards producing the output that consumers value the most.

In the Long Run, a Perfectly Competitive Industry Is Allocatively