Under pure competition, in the long run
A) neither allocative efficiency nor productive efficiency is achieved.
B) both allocative efficiency and productive efficiency are achieved.
C) productive efficiency is achieved, but allocative efficiency is not.
D) allocative efficiency is achieved, but productive efficiency is not.

Question

Quizplus · Accepted Answer

Under pure competition, in the long run, both allocative efficiency (achieving production at the lowest possible cost) and productive efficiency (producing output at the lowest possible cost) are achieved. This is because firms in a perfectly competitive market are price takers and have no market power, which means they must produce at the lowest cost to remain profitable in the long run. Additionally, in a perfectly competitive market, the equilibrium price is equal to the marginal cost of production, leading to allocative efficiency.

Under Pure Competition, in the Long Run