Pure competition produces a socially optimal allocation of resources in the long run because
A) marginal cost equals marginal revenue.
B) marginal cost equals average total cost.
C) marginal revenue equals price.
D) marginal cost equals price.

Question

Quizplus · Accepted Answer

In pure competition, firms will produce at the quantity where marginal cost equals price, meaning that they are producing at the point where resources are being used most efficiently. This is also the point where social marginal cost equals social marginal benefit, resulting in a socially optimal allocation of resources.

Pure Competition Produces a Socially Optimal Allocation of Resources in the Long