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Chapter 8: Q.28 (page 212)

Will a perfectly competitive market display productive efficiency? Why or why not?

Short Answer

Expert verified

In a perfect competitive market, there is a high level of productivity.

Step by step solution

01

Productive efficiency :

It occurs when the most efficient combination of inputs is used to provide the best possible combination of outputs at the lowest possible cost.

02

Explanation :

The term "productive efficiency" refers to production that is waste-free. In the long term, in a completely competitive market, there is an entrance and exit process for which the equilibrium market price is equal to the long-run average cost curve's minimum. To put it another way, items are manufactured and sold at the lowest feasible cost. P=MC=LRAC in a completely competitive market. The same may be said of the input market. As a result, in a completely competitive market, market forces determine productive efficiency.

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Most popular questions from this chapter

Should a firm shut down immediately if it is making losses?

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Firms in a perfectly competitive market are said to be 鈥減rice takers鈥濃�攖hat is, once the market determines an equilibrium price for the product, firms must accept this price. If you sell a product in a perfectly competitive market, but you are not happy with its price, would you raise the price, even by a cent?

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