In perfect competition, when firms are maximizing profits and households are maximizing utility,
A) Pareto optimality has been obtained.
B) voluntary exchange can be used to make both firms and households better off.
C) the outcome is inefficient.
D) individual welfare is maximized, but social welfare is not.

Question

Quizplus · Accepted Answer

In a perfect competition scenario, when firms are maximizing profits and households are maximizing utility, the market reaches a state of Pareto optimality. This means that it is impossible to make any one individual better off without making someone else worse off, indicating an efficient allocation of resources.

In Perfect Competition, When Firms Are Maximizing Profits and Households