Under the conditions of perfect competition, a market will be allocatively effi cient as long as the fi rms in that market produce at the P=MC level of output. Price is a signal from buyers to sellers, and the price seen by fi rms signals the marginal benefi t of consumers in the market. If the price consumers pay for a product is greater than the marginal cost to fi rms of producing it, then the message being sent to producers is that more output is demanded. In the pursuit of profi ts, more resources will be allocated towards the production of the product until the marginal cost and the price are equal. At the P=MC point fi rms maximize their profi ts and resources are said to be efﬁ ciently allocated.