The demand and cost conditions in an industry are as depicted in Figure 11-6. In the viewpoint of economic efficiency, what would the ideal price and output be?

A) price, P₁; quantity produced, Q₁
B) price, P₂; quantity produced, Q₂
C) price, P₃; quantity produced, Q₁
D) price, P₁; quantity produced, Q₂

Economic Efficiency

Economic efficiency is a state where resources are allocated in such a way that maximizes the production of goods and services at the lowest cost, thereby optimizing societal welfare.

Demand Conditions

The various factors that influence the quantity of a product or service that consumers are willing and able to purchase.

Cost Conditions

Relate to the factors that influence the costs of production for goods and services, including material, labor, and overhead costs.