Selling a good at a price determined by the intersection of the demand curve and the marginal cost curve is consistent with the

Question

Quizplus · Accepted Answer

(i) This is consistent with the principle of profit maximization, as selling at the intersection of demand and marginal cost ensures that the firm is maximizing its profits.
(ii) This is consistent with the principle of allocative efficiency, as selling at the intersection of demand and marginal cost ensures that the good is being produced at the lowest possible cost and is being allocated to the consumers who value it the most.
(iii) This statement is not necessarily true, as it depends on the shape and position of the supply curve. If the supply curve is perfectly elastic, meaning that the marginal cost is equal to the market price, then selling at the intersection of demand and marginal cost would result in a price that is higher than the minimum average total cost, leading to a loss for the firm.

Selling a Good at a Price Determined by the Intersection