Which of the following statements is TRUE?
I. A free market minimizes the total costs of producing output
II.In a free market, P = MC1 = MC2 = . . . MCN
III. Every firm faces the same price in a competitive market.
A)I and II only
B)III only
C)I and III only
D)I, II, and III

Question

Quizplus · Accepted Answer

In a free market, the goal is to minimize total costs of producing output, ensuring that resources are allocated efficiently. The condition P = MC (where P is the price and MC is the marginal cost) ensures that resources are allocated where they are most valued, and it holds for all firms in a perfectly competitive market. Additionally, in a competitive market, every firm faces the same price, which is determined by the market supply and demand.

Which of the Following Statements Is TRUE