Why is the pricing outcome of a perfectly competitive firm efficient in economic sense?
What will be an ideal response?
A perfectly competitive firm sells its product at a price that equals the opportunity cost, or the marginal cost, to society of producing one more unit of the product. Because the price that consumers are willing to pay for the last unit of the good is the marginal benefit to them, the pricing outcome of a competitive firm implies that the marginal benefit to consumers equals the marginal cost to society of producing the last unit. This outcome is efficient because it is impossible to increase the output of any good without lowering the value of the total output produced in the economy.
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The demand for a monopoly's output is p = 100 - Q. The firm's production function is Q = 2L. Which of the following is the firm's demand for labor?
A) w = 200 - 8L B) w = 200 - 4L C) w = 100 - L D) w = 2L
Andrew and Sarah are two traders in a pure exchange economy with two goods, Bikes and TVs. Suppose Andrew has preferences given by: U(B,T) = BT where B is the number of bikes and T is the number of TVs
Sarah only derives utility from TV, so her utility function can be given by: V(B,T) = T Describe the contract curve.
Which of the following is the largest single component of the market basket used to compute the consumer price index (CPI)? a. Food and beverages. b. Housing
c. Transportation. d. Medical care.
Suppose that in November a profit-maximizing firm has 100 employees. By December, the firm has decreased employment. One can infer that, when 100 employees are hired, the
a. firm is losing market share. b. firm is minimizing losses. c. wage exceeds the value of the marginal product of labor. d. value of the marginal product of labor exceeds the wage.