If all firms are profit maximizers,then the following is assured:
A)allocative efficiency.
B)each firm is productively efficient.
C)allocative and productive efficiency.
D)that the economy is operating inside the production possibilities boundary.
E)that firms attain the lowest possible average costs.

Question

Quizplus · Accepted Answer

If all firms are profit maximizers, it only ensures that each firm is productively efficient, which means they are producing goods and services at the lowest possible cost. However, it does not assure allocative efficiency, which refers to the optimal allocation of resources to different goods and services based on consumer preferences. Achieving allocative efficiency requires the prices of goods and services to reflect their true value to consumers, which may not always happen in a market economy. Similarly, it does not guarantee that the economy is operating inside the production possibilities boundary or that firms attain the lowest possible average costs.

If All Firms Are Profit Maximizers,then the Following Is Assured