Question 1

Which of the following describes a difference between allocative efficiency and productive efficiency in a perfectly competitive market?

Accepted Answer

The answer of Which of the following describes a difference...

Question 2

If productive efficiency characterizes a market,

Accepted Answer

Productive efficiency is achieved when the output is being produced at the lowest possible cost. This means that resources are being used in the most efficient way possible to produce the goods or services. This results in a lower cost of production which can lead to lower prices for consumers.

Question 3

In long-run competitive equilibrium,the perfectly competitive firm produces where price equals minimum average total cost.
a.What is this efficiency criterion called?
b.How does it benefit consumers?

Accepted Answer

The answer of In long-run competitive equilibrium,the perfectly competitive firm...

Question 4

________ in demand for organic food products in the United Kingdom will decrease a firm's economic profit,and the ________ in cost to grow organic food products in the United Kingdom will decrease a firm's economic profit.

Accepted Answer

If there is a decrease in demand for organic food products in the United Kingdom, the firm's economic profit will decrease because it will have fewer customers to sell to. On the other hand, an increase in cost to grow organic food products in the United Kingdom will decrease a firm's economic profit because it will cost more to produce the goods, resulting in lower profit margins.

Question 5

What is meant by allocative efficiency? How does a perfectly competitive firm achieve allocative efficiency?

Accepted Answer

The answer of What is meant by allocative efficiency? How...

Question 6

Perfectly competitive firms produce up to the point where the price of the good equals the marginal cost of producing the last unit.This condition is referred to as

Accepted Answer

This condition is referred to as allocative efficiency, which occurs when resources are allocated in such a way that the marginal benefit equals the marginal cost. In a perfectly competitive market, firms produce at the point where price equals marginal cost, ensuring that resources are allocated efficiently. Productive efficiency refers to producing at the lowest possible cost, while constant returns to scale refer to a production level where inputs and outputs increase proportionally. Perfectly competitive efficiency is not a recognized term in economics.

Question 7

A teenaged babysitter is similar to a firm in a perfectly competitive industry in that,for both,

Accepted Answer

Both a teenaged babysitter and a firm in a perfectly competitive industry face many other suppliers of similar goods or services. In the case of a babysitter, there are likely many other individuals in the area who offer babysitting services. In a perfectly competitive industry, there are numerous firms producing similar products, such as agricultural products or commodities like oil or gas. This competition helps to drive prices down and ensure that consumers have many options to choose from.

Question 8

Being able to label products as organic becomes very important to a number of firms when demand for these products is increasing.The increase in demand allows a firm to

Accepted Answer

When demand for organic products is increasing, firms that are able to label their products as organic can charge a higher market price and earn a larger economic profit. This is because consumers are willing to pay a premium for organic products, so firms that are able to offer such products can capture some of this additional value in the form of higher prices and profits.

Question 9

If a perfectly competitive firm achieves productive efficiency then

Accepted Answer

Productive efficiency occurs when a firm produces a good at the lowest possible cost. This means that the firm is operating at the point where average total cost is minimized, which is also the point where marginal cost equals average total cost. This is the point where the firm is producing at minimum efficient scale. However, achieving productive efficiency does not necessarily mean that the firm will raise its price to earn an economic profit. In a perfectly competitive market, the price is determined by the market and the firm cannot raise its price without losing all of its customers. The price of the good sold by a perfectly competitive firm is equal to the marginal cost, which is also equal to the benefit that consumers receive from consuming the last unit of the good.

Question 10

Allocative efficiency is achieved in an industry when firms supply those goods and services that provide consumers with a marginal benefit equal to the marginal cost of producing those goods and services.

Accepted Answer

Allocative efficiency occurs when resources are allocated in a way that produces the most beneficial outcome for consumers. This occurs when the marginal benefit of consumption is equal to the marginal cost of production.

Question 11

A perfectly competitive firm in long-run equilibrium produces output at the lowest possible average total cost.

Accepted Answer

In the long-run equilibrium, a perfectly competitive firm produces output at the point where its marginal cost equals its marginal revenue, and this point corresponds to the minimum point on the firm's average total cost curve. Therefore, the firm is producing at the lowest possible average total cost.

Quiz 12: Firms in Perfectly Competitive Markets