This preview shows page 1. Sign up to view the full content.
Unformatted text preview: rice = Marginal Cost is said to
exhibit resource allocative efficiency.
• A firm that produces its output at the lowest
possible per unit cost is said to exhibit
productive efficiency. The Perfectly Competitive Firm and
Resource Allocative Efficiency
For the perfectly
that quantity of
output at which
MR=MC. Because P=MR and MR=MC, it follows that
P=MC, that is the perfectly competitive firm
exhibits resource allocative efficiency. Profit Maximization and Loss Minimization for
the Perfectly Competitive Firm: Three Cases Profit Maximization and Loss
Minimization for Perfect Competition
• A firm produces in the short run as long as price is
above average variable cost.
• A firm shuts down in the short run if price is less
than average variable cost.
• A firm produces in the short run as long as total
revenue is greater than total variable costs.
• A firm shuts down in the short run if total r...
View Full Document