The diagram below illustrates the long-run equilibrium position of a representative firm operating under conditions of perfect competition.
Which of the following statements correctly identifies the efficiency status of this firm at equilibrium point EEE?
The firm achieves productive and dynamic efficiency because P=MCP = MCP=MC, but fails to achieve allocative efficiency because it operates at the minimum point of its ATCATCATC curve.
The firm achieves allocative efficiency because P=MCP = MCP=MC and productive efficiency because it operates at the minimum point of its ATCATCATC curve, but is unlikely to achieve dynamic efficiency because it only earns normal profit.
The firm achieves dynamic efficiency because it operates at the minimum point of its ATCATCATC curve, but fails to achieve allocative and productive efficiency due to the lack of supernormal profits.
The firm achieves allocative, productive, and dynamic efficiency simultaneously at point EEE because perfect competition guarantees maximum welfare over time.
