1 Point Question 35 In perfect competition, ______ efficiency occurs when the price that consumers are willing to pay for an item equals the marginal cost that is needed to produce it. A productive B allocative C profit D price
Added by Lauren D.
Close
Step 1
Step 1: In perfect competition, efficiency occurs when the price that consumers are willing to pay for an item equals the marginal cost that is needed to produce it. Show more…
Show all steps
Your feedback will help us improve your experience
Azat Nurmukhametov and 58 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
The market for good Q is perfectly competitive. However, it features negative externalities. Consumers' marginal benefit is MB = 90 - Q. Producers' marginal private cost is MC = Q. The production of this good generates a marginal external cost MEC = 4. a) In the equilibrium of this market, the perfect competition quantity is QPC = 45. b) The socially efficient quantity is Qsoc = 43. c) To achieve efficiency, the government can introduce: - $2 per unit subsidy - $4 per unit subsidy - $2 per unit tax - $4 per unit tax QUESTION 9 The market for good is perfectly competitive. However, it features negative externalities. Consumers' marginal private benefit is MB = 100 - Q.
Azat N.
Question 1: Which of the following is true of a profit-maximizing monopolist firm? 1) It has no incentive to minimize its costs 2) It sets price equal to marginal cost 3) It chooses a production level higher than that which is socially optimal 4) It chooses a production level on the elastic portion of the demand curve 5) It chooses a production level such that marginal revenue is greater than marginal cost Question 2: In which of the following market structures do firms maximize profits by producing at the point where price is equal to marginal cost? I. Perfect competition II. Monopoly III. Oligopoly IV. Monopolistic competition 1) I 2) II 3) II and III 4) I and IV 5) I, II, III, and IV
Andrew D.
Perfectly competitive markets result in allocative efficiency because firms produce all units for which the price is greater than or equal to the marginal cost. In this way, resources are allocated to their highest valued use. When markets result in outcomes that do not yield efficiency, it is referred to as market failure. Assign each scenario to the appropriate bin based on whether or not market failure has occurred. Market Efficiency Market Failure A perfectly competitive firm produces where Price = Marginal Cost, but the firm's production results in air pollution. A perfectly competitive market in long run equilibrium. (Assume there are no externalities.) A firm produces all units for which the marginal benefit is greater than or equal to the marginal social cost. A perfectly competitive firm produces where Price = Marginal Cost < Marginal Social Cost.
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Transcript
18,000,000+
Students on Numerade
Trusted by students at 8,000+ universities
Watch the video solution with this free unlock.
EMAIL
PASSWORD