How does competition ensure that the efficient product mix is attained?
What will be an ideal response?
In a competitive market, producers choose an output level where marginal cost equals price. Thus, Px/Py = MCx/MCy. Each consumer maximizes her own utility subject to the given prices by setting MUx/MUy = px/py. Even though each is acting independently and in her own interest, the final outcome is that px/py = MRS = MRT, which is the condition for efficient product mix.
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Refer to Table 3-2. The table above shows the demand schedules for caviar of two individuals (Ari and Sonia) and the rest of the market. If the price of caviar falls from $45 to $35, the market quantity demanded would
A) increase by 50 oz. B) decrease by 50 oz. C) decrease by 70 oz. D) increase by 70 oz.
In the United States, the minimum wage is defined as
A) the wage that the youngest job entrant into the job market makes. B) the lowest wage that a corporation should pay a worker if the corporation wants to ensure that its employees are well trained. C) the lowest hourly wage rate a firm may legally pay its workers, as legislated by the U.S. government. D) the wage ceiling above which a firm no longer must pay its employees additional benefits.