Economic efficiency in a competitive market is achieved when
A economic surplus is equal to consumer surplus.
B producer surplus equals the total amount firms receive from consumers minus the cost of production.
C consumers and producers are satisfied..
D the marginal benefit equals the marginal cost from the last unit sold.
The correct answer and explanation is :
The correct answer is:
D) The marginal benefit equals the marginal cost from the last unit sold.
In a competitive market, economic efficiency is achieved when resources are allocated in such a way that the marginal benefit (MB) to consumers of the last unit sold is equal to the marginal cost (MC) of producing that unit. This ensures that no resources are wasted and that the market is operating at an optimal level.
Here’s a breakdown of why the other options are incorrect:
- A) Economic surplus is equal to consumer surplus: This is incorrect because economic surplus is the sum of both consumer surplus and producer surplus, not just consumer surplus.
- B) Producer surplus equals the total amount firms receive from consumers minus the cost of production: This is close but not entirely accurate. Producer surplus is the difference between the amount producers are paid and the minimum amount they are willing to accept (which often includes the cost of production).
- C) Consumers and producers are satisfied: Satisfaction is subjective and does not necessarily imply economic efficiency. Efficiency is about optimal resource allocation, not necessarily satisfaction.
So, option D is the key to understanding economic efficiency in a competitive market.