Only one of the following statements is correct. The statements compare perfectly competitive (PC) markets and monopolistically competitive (MC) markets. Which statement is correct?
A) Productive efficiency is achieved in both PC and MC markets. Allocative efficiency is achieved only in MC markets.
B) Allocative efficiency is achieved in both PC and MC markets. Productive efficiency is achieved only in PC markets.
C) Productive efficiency and allocative efficiency are both achieved in PC markets. Neither is achieved in MC markets.
D) Allocative efficiency is achieved only in PC markets. Productive efficiency is achieved only in MC markets.
Answer: C
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Your roommate, Serafina, a psychology major, said, "The problem with economics is that it assumes that consumers and firms always make the correct decision. But we know that everyone's human, and we all make mistakes." Do you agree with her comment?
A) Yes, I agree with her. One cannot make predictions about economic behavior because in reality people make incorrect choices in many situations. B) I disagree with her. Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave rationally, meaning they make the best decisions given their knowledge of the costs and benefits. C) Yes, I agree with her. Economic theory should allow for irrational behavior so that we can have more reliable predictions. D) I disagree with her. If we cannot assume that decisions are correct, then we will not be able to examine the moral implications of these decisions.
The shape of the demand curve for labor shows how responsive firms are to changes in wages.
Answer the following statement true (T) or false (F)
Which of the following factors has been suggested as an explanation for the lack of economic growth in many poor nations?
A. a lack of dependence on the already developed nations B. the supply of human resources is too high. C. inadequate level of resources D. insufficient capital formation
According to the theory of economic Darwinism, in the absence of barriers to entry, firms that survive in the long run are those that:
A. do not compete with other firms in the industry on quality. B. provide productivity-based incentives to the employees. C. follow the most ethical practices. D. deliver products consumers want at the lowest cost.