Consider Three Firms,A,B and C,all Producing Kilos of Potatoes (Per

question 22

Multiple Choice

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. FIGURE 12-1
-Refer to Figure 12-1.Suppose each of Firms A,B,and C are producing 500 kilos of potatoes.Which of the following statements correctly describes the productive efficiency of this industry?

• A)Productive efficiency would be achieved if Firm B produced all the output,since it has the lowest MC for the production of 500 kilos.
• B)It is possible to reduce the total cost of the given output by reallocating production among the three firms.
• C)The total output of 1500 kilos is the productively efficient output for this industry,so no reallocation is necessary.
• D)It is not possible to say whether this industry is productively efficient because we do not know the market price of the product.
• E)It is not possible to say whether this industry is productively efficient because we do not know the average costs for each firm.

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