To be efficient, a competitive equilibrium must allocate goods to consumers so that no reallocation of the goods could make all consumers better off.

Question

Quizplus · Accepted Answer

This statement is true. In a competitive equilibrium, the market price is such that the quantity demanded by consumers equals the quantity supplied by producers. Therefore, any attempt to reallocate the goods would result in a surplus for some consumers and a shortage for others, ultimately leading to a less efficient outcome. This statement is true. A competitive equilibrium is efficient because it maximizes the total welfare of all consumers and producers in the market by allocating goods to the consumers with the highest willingness to pay and producers with the lowest cost of production. Any reallocation of goods would result in some consumers or producers being worse off, which means the initial allocation was already efficient.

To Be Efficient, a Competitive Equilibrium Must Allocate Goods to Consumers