In a perfectly competitive market,:
A) marginal costs will be less than average costs.
B) all firms will produce an equal amount of output.
C) total industry costs of production are minimized.
D) market price will equal the total cost of production.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, total industry costs of production are minimized because firms are price takers and cannot charge higher prices than their competitors. As a result, each firm produces at the point where marginal cost equals price, which ensures that resources are allocated efficiently and total production costs of the industry are minimized. Options A, B, and D do not necessarily hold in a perfectly competitive market.

In a Perfectly Competitive Market