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A-Level Economics · Perfect competition (short-run profit) diagram question

Which point shows PRODUCTIVE EFFICIENCY — the bottom of the average cost curve?

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The diagram

The answer

Point F. Point F, where MC cuts AC at its lowest point. Every possible economy of scale has been exploited and average cost cannot fall further. Productive efficiency is the bottom of AC — point F — and MC must pass exactly through it, because average cost stops falling precisely when the cost of one more unit equals the average. Get that crossing wrong and the whole diagram is wrong.

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This is one of 6 questions on the perfect competition (short-run profit) diagram — every corner lettered, every wrong answer diagnosed.

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