A perfectly competitive industry achieves allocative efficiency in the long run. What does allocative efficiency mean?
A) Each firm produces up to the point where the price of the good equals the marginal cost of producing the last unit.
B) Each firm produces up to the point where all scale economies are exhausted.
C) Production occurs at the lowest average total cost.
D) Firms use an input combination that minimizes cost and maximizes output.
Answer: A
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Refer to the scenario above. Suppose besides consuming all the potatoes grown on his farm, Edwin buys 5 pounds of potatoes at $0.80 per pound. What is likely to happen in this case?
A) GDP will increase by $4. B) GDP will remain unchanged. C) GDP will decrease by $0.80. D) Trade surplus will increase by $4.
The firm’s average cost curve is the result of cost minimization in the use of fixed inputs.
Answer the following statement true (T) or false (F)
A solution to the budget-gaming problem is
a. Remove all kinks from the compensation schedule b. Use a target based pay function with each target scoring greater return c. Base compensations on meeting particular budget goals d. All of the above
While it can be hard to measure, when it comes to education, _______________ around the world.
a. the psychic cost is high b. the level of suspicion is increasing c. the social rate of return is positive d. the purely private benefits outweigh the social benefits