A competitive equilibrium is Pareto-efficient because ?
Correct answer: E. All of the above
- A. Producers are price takers
- B. consumers and producers face the same prices
- C. marginal costs and benefits are equal
- D. prices equal marginal cost and benefit
- E. All of the above
Explanation
In competitive equilibrium, price equals consumers’ marginal benefit and producers’ marginal cost, so the gains from trade are maximised. Price-taking behaviour and a common market price support this result, making all the listed statements applicable.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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