Answer this labor economics question in 100 words

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Explain the following sentence using economic arguments. “Under perfect competition in both the labor market and the product market society achieves an efficient allocation of labor.”

Mar 19th, 2015

Perfect competition is an idealized market structure that achieves an efficient allocation of resources. This efficiency is achieved because the profit-maximizing quantity of output produced by a perfectly competitive firm results in the equality between price and marginal cost. In the short run, this involves the equality between price and short-run marginal cost. In the long run, this is seen with the equality between price and long-run marginal cost at the minimum efficient scale of production.

Mar 19th, 2015

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