PDF Problem Set 5 MULTIPLE CHOICE. Choose the one alternative ... Why is a competitive market efficient? - AskingLot.com Allocative efficiency is possible only in perfect competition. Answer: 39) If a perfectly competitive firm achieves productive efficiency then A) it will raise its price in order to earn an economic profit. In simple terms, the concept is illustrated on a production . If a perfectly competitive firm achieves productive efficiency then A) it is producing at minimum efficient scale. Productive efficiency is the situation in which a good or service is produced at the lowest possible cost. Introduction "To understand what makes markets less competitive inefficient, we d. Economists mean that production is inefficient. cannot produce more of a good, without more inputs. If a perfectly competitive firm achieves productive efficiency then A) it will raise its price in order to earn an economic profit. E) at all points either on or within the PPF because all these . Perfect competition achieves allocative efficiency. If the market price in a perfectly competitive industry exceeds the firm's minimum average variable cost, then the firm's total revenue will always exceed its _____. Self-Check Questions . Disadvantages of Perfect Competition The demand curve that confronts a monopolistically competitive firms is: A. less elastic than the demand curve that confronts the industry. This production decision can be analyzed in three different, but interrelated ways. Profit Maximization (Ultimate Goal of Business) 33、Firms operating in perfectly competitive markets try to maximize profits. Explain the role of barriers to entry and profits. Explain why this is the case D)cannot be determined from the information provided. Economists mean that trade is not possible. If a perfectly competitive firm achieves productive efficiency then: Select one: A. it is producing the good it sells at the lowest possible cost B. it will raise its price in order to earn an economic profit C. the price of the good it sells is equal to the benefit consumers receive from consuming the last unit of the good sold Firms in Perfectly Competitive Markets Chapter Outline 11.1 LEARNING OBJECTIVE . The picture frame market is perfectly competitive and the market price is $7 a frame. Furthermore, suppose that a representative firm's total cost is given by the equation TC = 100 + q2 + q where q is the quantity of output produced by the firm. Suppose that the perfectly competitive market with no government intervention achieves equilibrium at point A. The key goal for a perfectly competitive firm in maximizing its profits is to calculate the optimal level of output at which its Marginal Cost (MC) = Market Price (P). Keeping this in consideration, why is a perfectly competitive market efficient? A perfectly competitive industry achieves allocative efficiency Because A) it produces where price equals marginal market cost production. Rule 2: the firm should operate in the SR if TR > TVC, but should plan to close in the LR if TR < TC. Long-run economic profit for perfectly competitive firms. A) when it is not possible to produce more of one good. The figure illustrates the short-run costs of Paul's Picture Frames Inc. Write 'T' if the statement is true and 'F' if the statement is false. 1. definition In a perfectly competitive market, every firm is considered to have achieved both allocational and operational efficiency. As shown in the graph above, the profit maximization point . Does this describe a perfectly competitive firm, a monopolistically competitive firm, both, or neither? 16/05/2020 Fah's quiz history: Assessment Quiz #5 on Topic 5: Due by March 25 less than both average revenue and marginal revenue. 0 / 1 pts Question 10 Incorrect Incorrect If a perfectly competitive firm achieves productive efficiency then it is producing at the maximum cost possible. C) Goods and Services are produced at the Lowest possible cost. A) it will raise its price in order to earn an economic profit. Search for: 639. 15. A perfectly competitive firm can sell as large a quantity as it wishes, as long as it accepts the prevailing market price. Proof: Determining Output. B)the price of the good it sells is equal to the benefit consumers receive from consuming the last unit of the good sold. (c) In the long run, a perfectly competitive industry achieves dynamic effi- ciency: that is, its members invest in developing new products and im . Perfect competition leads to allocative and productive efficiency because prices reflect consumers preferences and firms are motivated by profit. main page. There are two rules that govern the shutdown decision. A perfectly competitive firm is presumed to produce the quantity of output that maximizes economic profit --the difference between total revenue and total cost. Productive efficiency Productive efficiency requires that firms produce goods and services in the least costly way, where P = Minimum ATC. B. reducing income inequality. 2) 3)In monopolistically competitive industries, A)firms are not sensitive to changes in consumer demand. When a wheat grower, as we discussed in the Bring It Home feature, wants to know the going price of wheat, he or she has to check on the computer or listen to the radio. Long-run equilibrium in perfectly competitive markets meets two important conditions: allocative efficiency and productive efficiency. 6. C. less elastic than the demand curve facing a perfectly competitive firm. perfect competition, a firm is a price taker of its good since none of the firms can individually influence the price of the good to be purchased or sold. 8) Monopolistically competitive firms achieve allocative efficiency but not productive efficiency. INTRODUCTION b. the perfect competitor achieves productive efficiency, but the monopolist does not. A. enhancing monopoly power. b. Long-run equilibrium in perfectly competitive markets meets two important conditions: allocative efficiency and productive efficiency. Click to see full answer Moreover, are perfectly competitive markets Allocatively efficient in the long run? 9)If a perfectly competitive firm achieves productive efficiency then A)the price of the good it sells is equal to the benefit consumers receive from consuming the last unit of the good sold. then the firm should continue to produce. Second, they provide the maximum satisfaction attainable by society. However, it does not mean that the firms necessarily earn excess profit in the short-run. 4. Both the perfectly competitive firm and the monopolistically competitive firm produce at the output where marginal revenue equals marginal cost (MR = MC) but only the perfectly competitive firm achieves allocative efficiency. Self-Check Questions A. the same price and produce the same output as a competitive firm. If a perfectly competitive firm achieves productive efficiency then: Select one: a. the price of the good it sells is equal to the benefit consumers receive from consuming the last unit of the good sold. The figure illustrates the short-run costs of Paul's Picture Frames Inc. The key assumption is that a perfectly competitive firm, like any other firm, is motivate by profit maximization.The firm chooses to produce the quantity of output that generates highest possible level of profit, based on price, market demand, cost conditions, production technology, etc. c. Economists mean that people are not employed. Will a perfectly competitive market display allocative efficiency? At its profit-maximizing output, a pure nondiscriminating monopolist achieves: A. neither productive efficiency nor allocative efficiency. . B. Purely competitive firms achieve Productive Efficiency. Pure competition achieves Allocative Efficiency 3. B)it will raise its price in order to earn an economic profit. A firm's total revenue is found by multiplying its output by the price at which it sells that output. The total revenue of the firm= 0P 1 eQ 1 Total cost= 0abQ 1 Profit of the firm= P 1 eba. Click to see full answer. Answer:A. . Choose the one alternative that best completes the statement or answers the . First, resources are allocated to their best alternative use. B)the amount of variety in products is the same as in perfectly competitive industries. Efficiency in perfectly competitive markets.In the long run in a perfectly competitive market—because of the process of entry and exit—the price in the market is equal to the minimum of the long-run average cost curve. Profit: The first is directly through the analysis of economic profit, especially . In economics, allocative efficiency materializes at the intersection of the supply and demand curves. 16)The graph depicts the average total cost curve for a perfectly competitive firm. At the long . C) it is producing the good it sells at the lowest possible cost. B) it will raise its price in order to earn an economic profit. 18) If a perfectly competitive firm achieves productive efficiency then A) : 1387816. 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