When there is allocative efficiency in a purely competitive market for a product, the minimum price producers are willing to accept is
A) less than marginal benefit.
B) greater than marginal cost.
C) equal to the amount of efficiency or deadweight losses.
D) equal to the maximum price consumers are willing to pay.

Question

Quizplus · Accepted Answer

When there is allocative efficiency in a purely competitive market, the market price is equal to the marginal cost (MC) of production. This is where the society's marginal benefit (MB) curve intersects with the MC curve. Therefore, the maximum price that consumers are willing to pay (MB) would be equal to the minimum price that producers are willing to accept (MC) in order to continue producing the product. Thus, option D is the correct choice.

When There Is Allocative Efficiency in a Purely Competitive Market