A market failure occurs when
a. a market equilibrium is economically inefficient
b. a market equilibrium is economically efficient
c. perfect competition maximizes the sum of consumer and producer surplus
d. crime is not completely eliminated
e. involuntary exchanges are not completely eliminated
A
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Shortages occur at prices which are above the market clearing price
Indicate whether the statement is true or false
Why does the price level in a perfectly competitive market move toward the zero-profit point?
a. Because firms enter and exit the market in response to gains and losses b. Because short-run losses reverse the effects of long-run gains c. Because profitable firms increase short-run productivity d. Because firms operate below the average cost curve
A monopolistic competitor that earns profits in the current period is likely to expect: a. a loss in the future due to diseconomies of scale
b. the entry of firms with similar yet differentiated products in the long run. c. higher profits in the future due to barriers to entry. d. entry of new firms with identical products.
A simple Keynesian model is representative of a closed economy, with no foreign sector
Indicate whether the statement is true or false