Table of contents

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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

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Multiple Choice

When this firm is producing the profit-maximizing output:

Total revenue is equal to total cost

It earns an economic profit

Only allocative efficiency is reached (i.e. no productive efficiency)

Only productive efficiency is reached (i.e. no allocative efficiency)

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Verified step by step guidance

Identify the key elements in the graph for the single firm: Marginal Cost (MC), Average Total Cost (ATC), and Marginal Revenue (MR). Note that the price (P) is equal to MC and is at the minimum ATC.

Recognize that when P = MC = minimum ATC, the firm is operating at productive efficiency. This means the firm is producing at the lowest possible cost.

Understand that allocative efficiency occurs when P = MC, which is also satisfied in this scenario. This means resources are allocated in a way that maximizes total surplus.

Since P = minimum ATC, the firm is breaking even, meaning total revenue equals total cost, and there is no economic profit.

Conclude that the firm achieves both productive and allocative efficiency, but it does not earn an economic profit as total revenue equals total cost.