Table of contents

0. Basic Principles of Economics1h 5m
1. Reading and Understanding Graphs59m
2. Introductory Economic Models1h 10m
3. The Market Forces of Supply and Demand2h 26m
4. Elasticity2h 26m
5. Consumer and Producer Surplus; Price Ceilings and Floors3h 45m
6. Introduction to Taxes and Subsidies1h 46m
7. Externalities1h 12m
8. The Types of Goods1h 13m
9. International Trade1h 16m
10. The Costs of Production2h 35m
11. Perfect Competition2h 23m
12. Monopoly2h 13m
13. Monopolistic Competition1h 9m
14. Oligopoly1h 26m
15. Markets for the Factors of Production1h 26m
16. Income Inequality and Poverty35m
17. Asymmetric Information, Voting, and Public Choice39m
18. Consumer Choice and Behavioral Economics1h 16m

11. Perfect Competition

Perfect Competition and Efficiency

Microeconomics

11. Perfect Competition

Perfect Competition and Efficiency

Previous problem

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Multiple Choice

When P = MC = minimum ATC for individual firms, in the entire market:

Consumer surplus is larger than producer surplus

Producer surplus is larger than consumer surplus

Supply and demand are the same

Total surplus is at a maximum

Previous problem

Verified step by step guidance

Understand the concept of total surplus, which is the sum of consumer surplus and producer surplus. It represents the total net benefit to society from the production and consumption of goods.

Recognize that when price (P) equals marginal cost (MC) and also equals the minimum average total cost (ATC), the firm is operating at an efficient scale. This is a condition of perfect competition where firms produce at the lowest possible cost.

Recall that consumer surplus is the difference between what consumers are willing to pay and what they actually pay, while producer surplus is the difference between what producers receive and their costs of production.

In a perfectly competitive market, when P = MC = minimum ATC, the allocation of resources is efficient, meaning that the quantity of goods produced is optimal for maximizing total surplus.

Conclude that at this point, total surplus is maximized because the market is in equilibrium, where supply equals demand, and resources are allocated in the most efficient way possible, benefiting both consumers and producers.