Which is necessarily true for a purely competitive firm in short-run equilibrium?
Marginal revenue less marginal cost equals zero
A purely competitive firm's output is currently such that its marginal cost is $4 and marginal revenue is $5. Assuming profit maximization, the firm should:
leave price unchanged and raise output
A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 1,000 units is $2.50. The minimum possible average variable cost is $2.00. The market price of the product is $2.50. To maximize profit or minimize losses, the firm should:
continue producing 1000 units
A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 800 units is $3.50. The minimum possible average variable cost is $3.00. The market price of the product is $4.00. To maximize profit or minimize losses, the firm should:
produce more than 800 units
A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 500 units is $1.50. The minimum possible average variable cost is $1.00. The market price of the product is $1.25. To maximize profit or minimize losses, the firm should:
produce less than 500 units
In the short run the individual competitive firm's supply curve is the segment of the:
marginal cost curve lying above the average variable cost curve.
If a purely competitive firm shuts down in the short run:
it will realize a loss equal to its total fixed costs.
The representative firm in a purely competitive industry:
Will earn an economic profit of zero in the long run
If firms enter a purely competitive industry, then in the long run this change will shift the industry:
Supply curve to the right, and the market price will decrease
The long-run supply curve under pure competition will be
Downsloping in a decreasing-cost industry and upsloping in an increasing-cost industry
Productive efficiency refers to:
Cost minimization, where P = minimum ATC
Allocative efficiency occurs when the:
Marginal cost equals the marginal benefit to society
Along the purely competitive firm's demand curve, average revenue is equal to marginal revenue.
Market failure occurs when
the competitive market system under-or overallocates resources to production of goods
From the economist's perspective, "market failures" basically arise when
demand and supply do not accurately reflect all the benefits and all the costs of production
Which of the following is most likely to be a private good
If an economy is being "productively efficient," then that means the economy is:
using the least costly production techniques.
What are the two characteristics that differentiate public goods from private goods?
nonrivalry and nonexcludability
Once a government has provided a public good, everyone
can obtain the benefit
Because of free riders, the demand for a public good:
does not get expressed in the market, and the good does not get produced by private sellers.
a public good
can't be provided to one person without making it available to others as well
Which of the following statements is correct about measuring collective demand for public and private goods
Private good demand is found by horizontally adding individual demand curves; public good demand is found by vertically adding individual demand curves.
When the production of a product creates external costs greater than external benefits, a market is:
allocating too many resources to production of the product.
In a free-market economy, a product which entails a spillover benefit will be:
If some activity creates positive externalities as well as private benefits, then economic theory suggests that the activity ought to be
When external or spillover benefits occur in the production of a particular product, the private market tends to provide
too little of the product
One condition for individual bargaining to occur, according to the Coase theorem, is that there must be:
clearly defined property rights.
To internalize the external costs of pollution is to
make the polluter pay all of the costs associated with the polluting activity.
An emission fee levied against polluters will tend to:
internalize the external cost of pollution.
A market for pollution rights can be expected to
provide potential polluters with a monetary incentive to reduce emissions.
From an economist's point of view, costs:
may or may not involve monetary outlays.
Implicit and explicit costs are different in that
the former refer to non-expenditure costs and the latter to out-of-pocket costs
implicit costs are
Accounting profits are typically:
greater than economic profits because the former do not take implicit costs into account.