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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

Explain how the profit-maximizing rule of setting Chapter 8, Problem 10SCQ, Explain how the profit-maximizing rule of setting leads a perfectly competitive market to be leads a perfectly competitive market to be allocatively efficient.

To determine

How P=MC as a profit maximizing rule ensures allocative efficiency.

Explanation

In a perfectly competitive market, the profit maximizing rule of setting P=MC, states that when the price is set at MC, we see that the additional cost for a firm to produce a commodity will be exactly equal to the revenue it receives for the additional quantity sold in the market...

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