In order for the price system to have satisfied the exacting requirements for efficiency,
A)MU must equal MC for each and every commodity.
B)the average cost of producing each good must be equal to its MU.
C)the maximum possible of total economic profit must be produced.
D)every consumer's MU will be equal to marginal physical product.

Question

Quizplus · Accepted Answer

In order for the price system to achieve efficiency, it is necessary for producers to produce each good up to the point where the marginal cost (MC) of producing an additional unit is equal to the marginal utility (MU) that consumers derive from consuming it. This is because at that point, the additional benefit consumers derive (MU) is equal to the additional cost to producers (MC), and any further production would result in a net loss of welfare. Therefore, the condition that MU=MC must hold true for each and every commodity in order for the price system to be efficient.

In Order for the Price System to Have Satisfied the Exacting