Allocative efficiency: a situation in which the factors of production have been allocated so as to reflect what people demand (i. e. demand matches supply). Mb = mc in all markets and there can be no substitution between markets to increase welfare beyond its current level. Market equilibrium: a situation where the price in a given market is such that the quantity demanded is equal to the quantity supplied. Pareto efficiency: a situation in which there is no way of making any person better off without making someone else worse off ( a point on the production possibilities frontier) Perfect competition: a market in which there are many suppliers, each selling an identical product and many buys who are completely informed about the price of each supplier"s product, and there are no restriction on entry into the maket. Price taker: a supplier that cannot influence the price of a good or service they supply.