In a purely competitive industry, an optimal allocation of scarce resources occurs when
A)P = AC.
B)P = MC.
C)MR = AC.
D)TR = TC.

Question

Quizplus · Accepted Answer

In a purely competitive industry, an optimal allocation of scarce resources occurs when P = MC. This is because at this point, the marginal cost of producing an additional unit of output is equal to the price that consumers are willing to pay for it. As a result, producers are producing the quantity of output that maximizes their profits and consumers are getting the quantity of output that they demand at the lowest possible price.

In a Purely Competitive Industry, an Optimal Allocation of Scarce