Question

In: Economics

1) A perfectly competitve industry acheives allocative efficient in the long run. What does perfectly allocative...

1) A perfectly competitve industry acheives allocative efficient in the long run. What does perfectly allocative mean?

A) Production occurs at the lowest average total cost

B) Each firm produces up to the point where all scale economiss are exhaused.

C) Firms use an input combination that minimizes cost and maximizes output.

D) Each firm produces up to the point where the price of the good equals the marginal cost of producing the last unit.

2) In a perfectly competitve industry, in the long-run equlibirum

A) The typical firm earns zero profit

B) The typical firm is maximizing its revenue.

C) The typical firm is producing at the output where its long-run average total cost is not minimized.

D) The typical firm is earning an accounting profit greater than its implicit costs.

3). Which of the following arguments could be made as evidence that the market for produce sold at a farmers market is perfectly competitive?

A) The profits earned by farmers who sell their products at farmers markets have continued to grow despite the increasing number of farmers entering this market.

B) As more farmers began selling their products at a farmers market, the increase in supply has driven down prices to the point where they just cover cost of production.

C) The US department of Agriculture has established standards for the labeling of organic produce sold at farmers markets.

D) The sales of organically grown food have increased at a rate of 20% per year

Expert Solution

Correct choice for question one is option D. When there is an allocative efficiency it means that the resources are allocated in a manner that there is no wastage of resources. This can happen only when the price that the consumers are willing to pay equals the marginal cost of production

Correct choice for question two is option A. This is because in the long run there is free entry and exit so firms keep entering till the entire profit is vanished.

Correct choice for question 3 is option B. This is because when there are more number of farmers the supply increases and this reduces the price to the level where there is no economic profit and a accounting profit is earned

Rahul Sunny answered 2 years ago

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