What Is Implied If P = MC > AC

question 66

Multiple Choice

What is implied if P = MC > AC?

• A)The market is achieving productive efficiency but is not achieving allocative efficiency.
• B)The market is achieving allocative efficiency but is not achieving productive efficiency.
• C)The market is achieving neither productive efficiency nor allocative efficiency.
• D)The market is achieving both allocative efficiency and productive efficiency.

Describe the characteristics of a perfectly competitive industry that lead to efficiency.

Calculate industry supply based on individual firm supply in a perfectly competitive setting.

Understand the relationship between economic profits, average total cost, and market prices in determining firm behavior in the long run.

Predict market adjustments in response to changes in cost and demand in both short and long run.

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Definitions:

Perfectly Elastic

Describes a situation where the quantity demanded or supplied can change infinitely with any small change in price.

Price

The total monetary value expected, obliged, or handed over in exchange for something.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price level in a specified period.

Table: Price Elasticity

A tabulated representation that shows how the quantity demanded of a good or service responds to changes in its price, indicating the sensitivity of consumers to price changes.