Perfectly competitive markets are productively efficient because each firm produces where P = MC and the sum of consumer and producer surplus is at its maximum point.

Question

Quizplus · Accepted Answer

Productive efficiency occurs when firms produce at the lowest point on their average cost curve, not necessarily where P = MC. The condition P = MC is related to allocative efficiency, not productive efficiency.

Perfectly Competitive Markets Are Productively Efficient Because Each Firm Produces