Resource allocative efficiency exists for a perfectly competitive firm because

Question

Quizplus · Accepted Answer

Resource allocative efficiency exists when price equals marginal cost. In a perfectly competitive market, price equals marginal revenue for the firm. Therefore, to be allocatively efficient, the firm must equate price and marginal revenue with marginal cost. This is achieved by producing the quantity of output where marginal cost equals marginal revenue, which also maximizes profits. So, the correct choice is A, where the firm equates marginal revenue and marginal cost to maximize profits, ensuring resource allocative efficiency.

Resource Allocative Efficiency Exists for a Perfectly Competitive Firm Because