Keynesian economists tell us that under perfect competition, if there is no government interference and no central planning or directing, producers and consumers make uncoordinated decisions to produce exactly the quantity of each good that satisfies the equation MC=MU and scarce resources are allocated efficiently.
Marginal cost (MC) is the cost incurred by producing one additional unit of a commodity while marginal utility (MU) is the maximum amount of money a consumer is willing to pay for one more unit of a commodity. Continue reading →