The price that equals marginal cost of production is socially optimal because: multiple choiceit minimizes ATC.it achieves allocative efficiency.it yields a normal profit.it reduces a monopolist's profit.
Question
The price that equals marginal cost of production is socially optimal because: multiple choiceit minimizes ATC.it achieves allocative efficiency.it yields a normal profit.it reduces a monopolist's profit.
Solution
The price that equals marginal cost of production is socially optimal because it achieves allocative efficiency.
Here's why:
Allocative efficiency occurs when the price of the product equals the marginal cost of production. This is because it means that resources are being allocated in a way that maximizes the benefit to consumers and producers, taking into account people's preferences.
In other words, the price consumers are willing to pay (which is the price of the product) is equal to the cost of producing an additional unit (which is the marginal cost). This means that the right amount of resources is being used to produce the product - not too much and not too little.
So, the correct answer is: it achieves allocative efficiency.
Similar Questions
The socially optimal price (P = MC) is socially optimal because: multiple choiceit achieves allocative efficiency.it minimizes ATC.it reduces the monopolist's profit.it yields a normal profit.
If in a market the last unit of output was sold at a price higher than marginal costGroup of answer choicesproducers are better off producing more.consumers are better off if less of the product is sold.social welfare is not maximised.the unit increased total profit.
Multiple Choice QuestionProductive efficiency in monopolistically competitive markets does not occur in the long run because firms set the priceMultiple choice question.on the supply curve where MR=MC to maximize economic profit, making output more than optimal from society's perspective.on the supply curve where VC=MR to maximize economic profit, making output less than optimal from society's perspective.on the demand curve where MR=MC to maximize economic profit, making output less than optimal from society's perspective.on the demand curve where MR=ATC to maximize economic profit, making output more than optimal from society's perspective.
If a purely competitive firm is maximizing economic profit:Multiple Choiceit is necessarily maximizing per-unit profit.it may or may not be maximizing per unit profit.then per-unit profit will be minimized.it is necessarily over allocating resources to its product.
A competitive market maximises social welfare because in a competitive marketGroup of answer choicesprofits are zero.price equals marginal cost of the last unit produced.price equals average cost of the last unit produced.there is free entry and exit.
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