Why would it be economically inefficient for a firm to charge the price of a good greater than its marginal cost?
What will be an ideal response?
When price equals marginal cost, the marginal benefit to consumers equals the opportunity cost to society of producing one more unit of the good. This condition is efficient because it is impossible to increase the output of that good without lowering the value of the total output produced in the economy. If a firm charges a price greater than its marginal cost, then the firm is producing too little as people value additional units more than the cost to society of producing them.
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The curve that shows the relationship between inflation and unemployment when the economy is at full employment is the
A) aggregate supply curve. B) long-run Phillips curve. C) long-run Okun's curve. D) aggregate demand curve. E) short-run Phillips curve.
Which of the following is true of leakages and injections in the circular flow model? a. Leakages minus injections equal gross domestic product (GDP)
b. Injections minus leakages equal gross domestic product (GDP). c. Leakages minus injections equal zero in equilibrium. d. Leakages must be less than injections for an economy to be in equilibrium. e. Leakages must be greater than injections for an economy to be growing.
A dominant strategy:
A. is always the same for all players of a game. B. exists in every game. C. is the best one to follow no matter what strategy other players choose. D. awards the highest achievable payoff in a game.
The concept of Pareto optimality is a
A) utopian concept. B) useful concept because it guarantees economic equality. C) useful concept because it defines economic efficiency. D) useful concept that carefully balances a society's desires for equality and efficiency.