Which assumption(s) is (are) necessary for an efficient allocation of resources among firms?
A) Factor markets are open and competitive.
B) All firms pay the same prices for inputs.
C) Firms behave so as to maximize their profits.
D) All of the above are correct.

Question

Quizplus · Accepted Answer

All of the options listed are necessary assumptions for an efficient allocation of resources among firms. Open and competitive factor markets ensure that resources can move freely to where they are most valued. Uniform input prices across firms ensure that no firm has an unfair cost advantage simply due to input costs, allowing competition to reflect efficiency rather than market power. Profit-maximizing behavior drives firms to use resources in the most efficient manner to reduce costs and increase output.

Which Assumption(s) Is (Are) Necessary for an Efficient Allocation of Resources