Perfect competition ensures efficiency in industry output if:
A)the demand and supply curves are perfectly inelastic.
B)the marginal cost of producing the good is zero.
C)the demand and supply curves properly reflect the marginal benefits and costs.
D)the market price of the commodity truly reflects the private costs of production.

Question

Quizplus · Accepted Answer

Perfect competition ensures efficiency in industry output if the demand and supply curves properly reflect the marginal benefits and costs. This is because in perfect competition, the price is equal to the marginal cost of production, which represents the true cost of production to society. This ensures that resources are allocated efficiently and that the market reaches the socially optimal level of output. Option A is incorrect because perfectly inelastic demand and supply curves do not allow for adjustments in prices and quantities, which can lead to market inefficiencies. Option B is incorrect because a zero marginal cost of production is unlikely and would lead to market failure. Option D is incorrect because the market price should reflect both private and social costs, including externalities.

Perfect Competition Ensures Efficiency in Industry Output If