Which of the following suggests that a competitive firm earns ...

[sc00by25]

Which of the following suggests that a competitive firm earns zero economic profits?
 
  A) P = MC > ATC
  B) P > MC = ATC
  C) P = MC = ATC
  D) P > MC > ATC

Question 2

If an economy is producing at a point on its PPF, it has achieved allocative efficiency. True or false? Explain.
 
  What will be an ideal response?

[paavo]

Answer to Question 1

C

Answer to Question 2

If an economy is producing at a point on its PPF, it has achieved production efficiency, but not necessarily allocative efficiency. We have achieved allocative efficiency if we are producing at the point on the PPF that we prefer to all other points because at this point we cannot produce more of any good without giving up some other good that we value more highly.