Which of the following statements is true?
A)As a consequence of the monopoly firm producing the quantity of output at which price equals marginal cost, it is resource allocative efficient.
B)As a consequence of the perfectly competitive firm producing the quantity of output at which price equals marginal cost, it is resource allocative efficient.
C)a and b
D)none of the above

Question

Quizplus · Accepted Answer

In a perfectly competitive market, firms produce the quantity of output at which price equals marginal cost, leading to resource allocative efficiency. This is because goods are produced up to the point where the last unit provides a benefit to consumers exactly equal to the cost of producing it. Monopoly firms, however, do not typically produce at the point where price equals marginal cost, leading to a loss of allocative efficiency.

Which of the Following Statements Is True