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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

Finding a life partner is a complicated process that may take many years. It is hard to think of this process as being part of a very complex market, with a demand and a supply for partners. Think about how this market works and some of its characteristics, such as search costs. Would you consider it a perfectly competitive market?

What two lines on a cost curve diagram intersect at the zero-profit point?

Can you name five examples of perfectly competitive markets? Why or why not?

What are the four basic assumptions of perfect competition? Explain in words what they imply for a perfectly competitive firm.

What price will a perfectly competitive firm end up charging in the long run? Why?
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