Is a perfectly competitive firm Pareto efficient in the long run?
Explain. Yes, perfectly competitive markets are Pareto efficient in the long run because all perfectly competitive markets (in the long run) will produce at a quantity such that the long run average cost is minimized. If markets are producing the lowest possible cost, then it is impossible to make someone better off without making someone else worse off. 5. How do resources get efficiently allocated among firms? Resources always go to their most productive use in the long run in a perfectly competitive market. If the marginal revenue product (MRP) divided by the value added (P) is not equal across all inputs, the market must not be in equilibrium. When the market is in equilibrium, all firms will demand inputs up to the point where the MRP of each unit of the input is equal to the P for each unit of input. 6. How do we know if a market is producing the socially optimal quantity of each output? A market is producing the socially optimal (efficient) quantity of a good or service if the m
