A firm in perfect competition may produce a higher level of output than is socially optimum Because:
A) it's price does not represent the value that consumers place on a product.
B) it produces a level of output that does not please the society.
C) it always produces where price is equal to marginal cost.
D) it does not take into account third party-effects.

Question

Quizplus · Accepted Answer

In perfect competition, firms do not consider externalities, which are third-party effects, leading to overproduction if negative externalities are present.

A Firm in Perfect Competition May Produce a Higher Level