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20 June, 15:49

Why does efficiency drive the price down in a purely

competitive market?

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Answers (1)
  1. 20 June, 16:17
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    Answer: When perfectly competitive firms follow the rule that profits are maximized by producing at the quantity where price is equal to marginal cost, they are ensuring that the social benefits received from producing a good are in line with the social costs of production. If a perfectly competitive firm attempts to charge even a tiny amount more than the market price, it will be unable to make any sales.
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