What two conditions must hold for a competitive market to produce efficient outcomes?
A)Demand curves must reflect all costs of production, and supply curves must reflect consumers' full willingness to pay.
B)Supply curves must reflect all costs of production, and demand curves must reflect consumers' full willingness to pay.
C)Firms must minimize production costs, and consumers must minimize total expenditures.
D)Firms must maximize profits, and consumers must all pay prices equal to their maximum willingness to pay.

Question

Quizplus · Accepted Answer

For a competitive market to produce efficient outcomes, supply curves must reflect all costs of production, ensuring that the price of goods includes the cost of resources used in their creation. Demand curves must reflect consumers' full willingness to pay, indicating the true value consumers place on goods. This alignment ensures resources are allocated efficiently, matching supply with consumer demand.

What Two Conditions Must Hold for a Competitive Market to Produce