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.

The statement "A competitive market maximizes social welfare" is primarily because "price equals marginal cost of the last unit produced."

Here's why:

1. In a perfectly competitive market, firms are price takers. This means they take the market price as given and cannot influence it.

2. The price in a competitive market is determined by the intersection of market demand and market supply.

3. On the supply side, firms will produce up to the point where the price equals the marginal cost of production. This is because the marginal cost represents the cost of producing one more unit of a good.

4. If the price is higher than the marginal cost, firms can increase profits by increasing production. If the price is lower than the marginal cost, firms can increase profits by reducing production.

5. Therefore, in equilibrium, the price equals the marginal cost of the last unit produced.

6. This outcome is socially optimal because it ensures that resources are allocated efficiently. That is, goods are produced up to the point where the value to consumers (as represented by the price they are willing to pay) equals the cost of production.

7. Any other outcome would result in a deadweight loss, which is a loss of social welfare.

So, in a competitive market, social welfare is maximized because price equals the marginal cost of the last unit produced.