Answer the following statements true (T) or false (F)
1. An under-allocation of resources is occurring in a purely competitive industry whenever the price of the product is greater than marginal cost.
2. In pure competition, resources are optimally allocated when production occurs at the output level where P = MC.
3. Consumer surplus is the difference between the maximum price a consumer is willing to pay for a good and the market price of the product.
4. Producer surplus is the difference between the market price a producer receives for a product and the minimum price producers are willing to accept for a product.
5. Competitive markets produce equilibrium prices and quantities that maximize the sum of consumer and producer surpluses.
1. TRUE
2. TRUE
3. TRUE
4. TRUE
5. TRUE
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Under which of the following conditions will an increase in demand cause a relatively small increase in price?
A. If the shift of the demand curve is relatively small, the gap between the new demand and the old supply will be relatively small. B. If there is highly elastic demand, consumers are very responsive to changes in price. C. If there is highly elastic supply, producers are very responsive to changes in price. D. All of these.
The worst hyperinflation ever recorded happened in:
A. Hungary. B. Brazil. C. Zimbabwe. D. Germany.
Which of the following is an example of capital?
A. Money B. A bulldozer C. A CD D. A U.S. Savings bond
An example of price discrimination is the price charged for:
A. coffee. B. college admission. C. cashmere sweaters. D. cough syrup.