Competitive pricing is efficient because

Question

Quizplus · Accepted Answer

Competitive pricing ensures that the price consumers pay reflects the opportunity cost to society of producing the good, which leads to an efficient allocation of resources in the economy. This is because firms will only produce a good if they can cover their costs and make a profit, and in a competitive market, the price will be pushed down to the point where only firms with the lowest costs are able to survive. As a result, resources will be directed towards their most productive uses and consumer surplus will be maximized.

Competitive Pricing Is Efficient Because