At a competitive equilibrium, if there are no taxes, subsidies, price regulations, quantity regulations, or externalities,
A) both the marginal benefit and the marginal cost of the last unit produced equal zero.
B) the marginal benefit is less than the marginal cost.
C) the marginal benefit is greater than the marginal cost.
D) the marginal benefit is greater than the marginal cost by as much as possible.
E) resource use is efficient.

Question

Quizplus · Accepted Answer

At a competitive equilibrium without any distortions (like taxes, subsidies, price or quantity regulations, or externalities), the marginal benefit of the last unit produced equals the marginal cost of producing that unit. This condition reflects efficient resource use, as it indicates that resources are allocated in a way that maximizes the net benefits to society.

At a Competitive Equilibrium, If There Are No Taxes, Subsidies