Resource Allocative Efficiency Exists for a Perfectly Competitive Firm Because

question 95

Multiple Choice

Resource allocative efficiency exists for a perfectly competitive firm because

• A)price equals marginal revenue and the firm equates marginal revenue and marginal cost to maximize profits.
• B)price equals average total cost and the firm equates marginal revenue and average total cost to maximize profits.
• C)price is greater than marginal revenue and the firm equates marginal revenue with average total cost to maximize profits.
• D)price is less than marginal revenue and the firm equates marginal cost and marginal revenue to maximize profits.
• E)none of the above

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Definitions:

Utility

The subjective benefit or satisfaction a person expects from a choice or course of action.

Scarcity

The fundamental economic problem of having seemingly unlimited human wants in a world of limited resources, leading to the necessity of making choices.

Economizing Behavior

The practice of seeking to achieve maximum utility with limited resources, leading to optimal decision making.

Lowest Cost Method

A principle of optimizing operations or production by minimizing the costs involved in the process.