Which of the following statements is true of perfect competition?
A) The outcome in a perfectly competitive market is Pareto inefficient.
B) The total value of production across a perfectly competitive industry is maximized.
C) Firms under perfect competition produce at a point where price is greater than marginal cost.
D) Consumers in a competitive market purchase at a point where marginal utility is greater than price.

Question

Quizplus · Accepted Answer

Perfect competition leads to the maximization of total industry output because there are many firms producing the product with no market power to influence price. This results in firms producing at a point where price equals marginal cost, leading to efficiency. Option A is incorrect because perfect competition is Pareto efficient. Option C is incorrect because firms under perfect competition produce where price equals marginal cost. Option D is incorrect because consumers under perfect competition purchase at a point where marginal utility equals price.

Which of the Following Statements Is True of Perfect Competition