Consider three firms,A,B and C,all producing kilos of potatoes (per year)in a perfectly competitive market.The diagrams below show marginal cost curves for each of the three firms. FIGURE 12-1
-Refer to Figure 12-1.Suppose each of Firms A,B,and C are producing 500 kilos of potatoes.Is this industry productively efficient?
A)No,because the marginal cost curve for each firm has a different slope.
B)Yes,because output is equated for all firms.
C)No,because each firm could easily produce more than 500 kilos.
D)No,because marginal costs are not equated for all firms.
E)It is not possible to say whether this industry is productively efficient because we do not know the market price of the product.

Question

Consider three firms,A,B and C,all producing kilos of potatoes (per year)in a perfectly competitive market.The diagrams below show marginal cost curves for each of the three firms.  FIGURE 12-1
-Refer to Figure 12-1.Suppose each of Firms A,B,and C are producing 500 kilos of potatoes.Is this industry productively efficient?
A)No,because the marginal cost curve for each firm has a different slope. 
B)Yes,because output is equated for all firms. 
C)No,because each firm could easily produce more than 500 kilos. 
D)No,because marginal costs are not equated for all firms. 
E)It is not possible to say whether this industry is productively efficient because we do not know the market price of the product.

Quizplus · Accepted Answer

Productive efficiency requires that marginal costs are equated across all firms. If marginal costs are not equal, resources could be reallocated to produce the same output at a lower total cost.

Consider Three Firms,A,B and C,all Producing Kilos of Potatoes (Per