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What is Allocative and Productive Efficiency about?
In perfect competition, firms achieve long-run equilibrium where price equals minimum average total cost (P=min ATC), ensuring productive and allocative efficiency, with normal profits for firms. In contrast, a monopolist sets quantity where marginal cost equals marginal revenue (MC=MR), leading to higher prices and underproduction, thus failing to achieve allocative efficiency as price exceeds marginal cost. Additionally, monopolists may not attain productive efficiency due to a lack of competitive pressur
- Author
- Iqra Hussain
- Language
- EN