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1 April, 06:40

In a competitive market equilibrium

A. The marginal benefit equals the marginal cost of the last unit sold.

B. Marginal benefit and marginal cost are maximized.

C. Total consumer surplus equals total producer surplus.

D. Consumers and producers benefit equally.

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  1. 1 April, 09:48
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    In a competitive market equilibrium the marginal benefit equals the marginal cost of the last unit sold.

    Option A

    Explanation:

    In a competitive market equilibrium, the marginal benefit equals the marginal cost of the last unit sold.

    In Perfect Competition, Price (P) is equal to marginal revenue which is equal to Average revenue.

    As more units can be sold at the same price, addition to total revenue (ie. MR) is constant and equal to price (P).

    A perfectly competitive market is based on the idea that the firms do not make super normal profit. That means Revenue generated must be equal to Total Cost.

    Since Profit = Revenue-Cost. Over here profit becomes 0, thus validating a perfectly competitive market.

    For that to happen firms must charge the Price equal to the sum of average variable cost (AVC) and Average Fixed Cost (AFC).

    The sum of AVC and AFC is the average cost and that is assumed to be the same as Marginal Cost.

    As, AC=TC:Q. And MC Can also be written as TC:Q.

    Hence P=MC.
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