Is It Possible for a Perfectly Competitive Firm to Be

question 116

Multiple Choice

Is it possible for a perfectly competitive firm to be maximizing profits, but not achieving resource allocative efficiency?

• A)Definitely yes, because it is impossible to achieve both at the same time.
• B)Yes, it is possible, but it is not possible to minimize losses without also achieving resource allocative efficiency.
• C)No, it is not possible, because the output at which MR = MC is also the output at which P = MC.
• D)There is not enough information to answer this question.

---

Definitions:

Unemployment

A situation where individuals who are capable of working and willing to work cannot find employment.

Inefficiently Allocates

Describes a scenario where resources are not distributed or utilized in the most effective manner, leading to potential waste or misallocation.

Production Possibilities Frontier

A graph that shows the highest potential production levels for two or more products based on available resources.

Full Employment

Full employment refers to the condition in which all available labor resources are being used in the most efficient way possible, minimizing unemployment to only frictional or structural levels.