If a purely competitive firm is producing where price exceeds marginal cost, then:
A. the firm will fail to maximize profit, but resources will be efficiently allocated.
B. the firm will fail to maximize profit and resources will be overallocated to the product.
C. the firm will fail to maximize profit and resources will be underallocated to the product.
D. resources will be underallocated to the product, but the firm will maximize profit.
Answer: C. the firm will fail to maximize profit and resources will be underallocated to the product.
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In the circular flow model, households derive income from all of the following categories except
a. wages earned by labor b. revenue earned by firms c. profit earned by entrepreneurs d. rent earned by people providing land resources e. interest earned by people providing capital resources
An advancement in technology will cause
a) the PPF to shift inwards towards the origin. b) the PPF to shift outwards away from the origin. c) the economy to move down along the PPF curve. d) the economy to move upwards along the PPF curve.
Refer to the graph shown. Initially, the market is in equilibrium where the demand curve intersects S0. In the initial equilibrium, consumer surplus is equal to:
A. 2,250. B. 3,000. C. 1,500. D. 750.
Economists assume that rational behavior is useful in explaining choices people make
A) because irrational people do not make economic choices. B) because individuals act rationally all the time in all circumstances. C) even though people rarely, if ever, behave in a rational manner. D) even though people may not behave rationally all the time.