Because the equilibrium position of a purely competitive seller entails an equality of price and marginal costs, competition produces an efficient allocation of economic resources.

Question

Quizplus · Accepted Answer

When the price equals the marginal cost, the market is producing goods at the lowest possible cost and allocating resources efficiently. This is because the marginal cost reflects the cost of producing an additional unit of output, and if the price exceeds it, the firm is earning excess profits. Therefore, in a purely competitive market with many buyers and sellers, the equilibrium price will lead to an optimal allocation of resources.

Because the Equilibrium Position of a Purely Competitive Seller Entails