Question

In the short run, the entry of firms will result from ___________________.

In the short run, the exit of firms will result from ______________.

In the long run, there will be _______ economic profit.

Triple Equality is when _____ = minimum ______ = ______

The term productive efficiency means ______ = _______. This is important because _________________________.

The term allocative efficiency means _____ = ________. This is important because __________________________.

Answer 1

1> In the short run, the entry of firms will result from postive profit

2> In the short run, the exit of firms will result from negative profit (loss)

3> In the long run, there will be zero economic profit.

4> Triple Equality is when Price =Marginal Cost = Marginal Revenue

5> The term productive efficiency means Price = Lowest point of ATC. This is important because it leads to optimal use of resources to produce output.

6> The term allocative efficiency means Marginal Utility= Marginal Cost. This is important because it equalizes supply and demand, thus there is no shortage or surplus.

Reason

In a perfect market, it is the case that firms will enter if they see there will be an economic profit by entering and will exit if they are losing money. Only when economic profit = 0, this stabilizes leading to no entry and exit. In perfect equilibrium, triple equality occurs, it makes sure that the outcome is productively and allocatively efficient.