Does the market system result in allocative efficiency? In the long run, perfect competition

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22-08-2022
Business

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Does the market system result in allocative efficiency? In the long run, perfect competition

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AnnuG AnnuG · Answer 1 · 2022-08-31T13:19:26+02:00

Yes, the market system does result in allocative efficiency in the long run because production eventually matches demand.

In a perfectly competitive market, there is both allocative efficiency and productive efficiency. Productive efficiency means that production levels are such that there is no waste, and only goods that are in demand are produced.

Allocative efficiency means that resources are allotted to their best possible use. In a perfect market system, the price of a good or service is equal to the marginal cost of its production.

The price represents the demands for each particular product, while the marginal cost of production refers to the cost incurred in producing that product. Thus, each type and level of product corresponds to the prevailing demands in society, meaning that allocation is done effectively.

To learn more about perfectly competitive market: brainly.com/question/7024827

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