The condition P = MC implies that
A) there is no consumer surplus for any consumer.
B) an individual who values the product at more than P will receive consumer surplus.
C) an individual who values the product at less than P will receive consumer surplus.
D) the amount of consumer surplus is infinite.

Question

Quizplus · Accepted Answer

The condition P = MC (Price equals Marginal Cost) is a condition for optimal allocation of resources in perfect competition, implying that the product is sold at the lowest sustainable price. Consumers who value the product more than its price (P) will indeed receive consumer surplus, as they are getting the product for less than the maximum amount they are willing to pay.

The Condition P = MC Implies That