Pure competition produces a socially optimal allocation of resources in the long run because
A)marginal cost equals marginal revenue.
B)marginal cost equals average total cost.
C)marginal revenue equals price.
D)marginal cost equals price.

Question

Quizplus · Accepted Answer

In a purely competitive market, firms produce at a point where marginal cost (MC) equals price (P), which is also equal to marginal revenue (MR) for a perfectly competitive firm. This condition ensures that resources are allocated efficiently, as firms produce up to the point where the cost of producing one more unit equals the revenue gained from selling that unit, leading to a socially optimal allocation of resources.

Pure Competition Produces a Socially Optimal Allocation of Resources in the Long