Asked by Giang Nguyen on May 05, 2024
Verified
In the long run the perfect competitor's firm's most efficient output
A) is identical to its most profitable output.
B) is less than its most profitable output.
C) is more than its most profitable output.
Perfect Competitor's Firm
A company operating in a market where no single firm can influence price, and all firms sell identical products.
Most Efficient Output
The level of production at which average total cost is minimized and productive efficiency is achieved.
Most Profitable Output
The level of production at which a company achieves the highest possible profit, where marginal revenue equals marginal cost.
- Identify the efficiency criteria for firms in perfect competition in terms of productive and allocative efficiency.
Verified Answer
EA
Emily AshbyMay 08, 2024
Final Answer :
A
Explanation :
In the long run, a perfectly competitive firm adjusts its scale of operation until its average total cost is minimized, at which point it produces its most efficient output. This level of output also coincides with where the firm maximizes its profits, as price equals marginal cost equals minimum average total cost in long-run equilibrium for a perfectly competitive firm.
Learning Objectives
- Identify the efficiency criteria for firms in perfect competition in terms of productive and allocative efficiency.