FIGURE 12- 1 Consider Three Firms,A,B and C,all Producing Kilos

question 14

Multiple Choice

FIGURE 12- 1 Consider three firms,A,B and C,all producing kilos of potatoes (per year) in a perfectly competitive market.The diagrams below show marginal cost curves for each of the three firms.

-Refer to Figure 12- 1.Suppose each of Firms A,B,and C are producing 500 kilos of potatoes.Is this industry allocatively efficient?

• A)It is not possible to say whether this industry is allocatively efficient because we do not know the average costs for each firm.
• B)No,because the marginal cost curve for each firm has a different slope.
• C)Yes,because output is equated for all firms.
• D)It is not possible to say whether this industry is allocatively efficient because we do not know the market price for kilos of potatoes.
• E)No,since marginal costs are not equated for all firms,the industry is not productively efficient,and thus cannot be allocatively efficient.

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