The figure given below shows the demand curves of two classes of buyers, for tickets to a football match.Figure 11.4
D 1 : Demand curve of group 1
D 2 : Demand curve of group 2
MR 1 : Marginal revenue of group 1
MR 2 : Marginal revenue of group 2
MC: Marginal cost
-The perfectly competitive market structure results in economic efficiency because:
A)price is equal to marginal revenue in the short run.
B)firms are producing at the minimum point of the average-total-cost curve in the short run.
C)a normal profit is being earned in the long run.
D)a normal profit is being earned in the short run.
E)in the long-run, price is equal to marginal cost and minimum average-total-cost.

Question

The figure given below shows the demand curves of two classes of buyers, for tickets to a football match.Figure 11.4
  D 1 : Demand curve of group 1
D 2 : Demand curve of group 2
MR 1 : Marginal revenue of group 1
MR 2 : Marginal revenue of group 2
MC: Marginal cost
-The perfectly competitive market structure results in economic efficiency because:
A)price is equal to marginal revenue in the short run. 
B)firms are producing at the minimum point of the average-total-cost curve in the short run. 
C)a normal profit is being earned in the long run. 
D)a normal profit is being earned in the short run. 
E)in the long-run, price is equal to marginal cost and minimum average-total-cost.

Quizplus · Accepted Answer

In a perfectly competitive market structure, economic efficiency is achieved in the long-run when price is equal to marginal cost and minimum average-total-cost, resulting in firms earning only a normal profit. In the short run, firms may earn abnormal profits, but in the long run, new firms will enter the market, increasing supply and driving down prices until only a normal profit is earned. Therefore, choice E is the correct answer.

The Figure Given Below Shows the Demand Curves of Two