Asked by Kartik Chopra on Jul 30, 2024
Verified
When a perfectly competitive firm weighs price and marginal cost and no externalities exist, it is weighing the full benefits to ________ of additional production against the full costs to ________ of that production.
A) society; society
B) buyers; sellers
C) sellers; buyers
D) government; government
Perfectly Competitive
A market structure characterized by many sellers offering identical products, leading to price determination through supply and demand forces without individual control.
Externalities
Economic side effects or consequences that affect an uninvolved third party; can be either positive or negative.
- Gain an understanding of the nature of externalities and how they influence communal welfare.
Verified Answer
SA
Samer AlanbakiAug 03, 2024
Final Answer :
A
Explanation :
In a perfectly competitive market without externalities, the price reflects the value to buyers (society's benefit) and the marginal cost reflects the cost to sellers (society's cost). Therefore, when a firm weighs price against marginal cost, it is comparing the full benefits to society against the full costs to society.
Learning Objectives
- Gain an understanding of the nature of externalities and how they influence communal welfare.