When goods are rival in consumption and excludable,perfectly competitive markets:
A)will consistently produce more than the efficient quantity of the good.
B)will produce an efficient quantity of the good.
C)will consistently produce less than the efficient quantity of the good.
D)will find that consumers are unwilling to purchase the good.

Question

Quizplus · Accepted Answer

In perfectly competitive markets, firms will produce the quantity of the good where marginal cost equals marginal revenue. This is also the socially efficient level of production because it ensures that the marginal benefit to society of consuming the good (the price individuals are willing to pay) is equal to the marginal cost of producing it. Since the good is rival in consumption and excludable, only those who pay for the good can consume it, and the market can exclude those who do not pay. Therefore, a perfectly competitive market will produce the efficient quantity of the good.

When Goods Are Rival in Consumption and Excludable,perfectly Competitive Markets