A perfectly competitive industry achieves allocative efficiency in the long run.What does allocative efficiency mean?

Question

Quizplus · Accepted Answer

Allocative efficiency means producing goods up to the point where the price of the good equals the marginal cost of producing the last unit. This ensures that resources are allocated efficiently and that there is no wastage or excess production. In a perfectly competitive industry, firms are price takers and cannot influence the market price. Therefore, they have to produce up to the point where the price equals the marginal cost to remain competitive, and this leads to allocative efficiency.

A Perfectly Competitive Industry Achieves Allocative Efficiency in the Long