Perfectly competitive factor and output markets that satisfy the efficiency condition are similar in that both generate:
A) an underproduction of output.
B) an overproduction of output.
C) market prices that are greater than opportunity costs.
D) market prices that are equal to opportunity costs.

Question

Quizplus · Accepted Answer

Both perfectly competitive factor and output markets that satisfy the efficiency condition result in market prices that are equal to opportunity costs. In other words, resources are allocated efficiently in both markets, with prices reflecting the true cost of production for firms and the true value of resources for consumers. Choices A and B are incorrect because efficiency implies that output is produced at the lowest possible cost, which typically involves producing at the point where marginal cost equals marginal revenue (or price in a perfectly competitive market). This ensures that society gets the maximum possible benefit from the resources used in production.

Perfectly Competitive Factor and Output Markets That Satisfy the Efficiency