Quiz 5

Test 1

Discussion 1

Question 15

Productive efficiency in perfectly competitive market

Productive efficiency indicates a situation where firms produce output with the lowest possible cost. In other words, productive efficiency refers to the state where output is produced corresponding to minimum of average total cost. Perfectly competitive firm in the long run attains productive efficiency. In the long run, firms in the perfectly competitive industry produces output where price equals minimum of average total cost and earns zero economic profit. As long run output corresponds to the minimum of average total cost, firm achieves productive efficiency.