ECON Chapter 7 Dynamic Study Module

When a competitive market is in equilibrium, what is the economically efficient level of output?

The output where marginal cost is exactly equal to marginal benefit.

In perfect competition, the marginal revenue is the same as:

Price

Price performs a(n) __________ function. Inputs or outputs go to the __________ bidders if people are free to exchange voluntarily in the markets without government intervention or other market friction.

rationing, highest

Prolonged agricultural surpluses can arise if governments:

set the price above equilibrium

Price controls that put a maximum price (price ceiling) on goods and services that is below a free market price create __________.

shortages

Which of the following terms best refers to a fair distribution of economic benefits?

Equity

Which of the following countries has an economy where most of the resource allocation is determined by a central planning authority?

North Korea

In the short run, the firm should:

Operate (produce) if price > average variable cost.

When is output lower than the efficient level?

When marginal benefit is greater than marginal cost

When is output higher than the efficient level?

When marginal benefit is less than marginal cost

In what type of economy does the government decide how economic resources will be allocated?

a centrally planned economy

For markets to generate the greatest benefit and function in the most efficient manner they must:

be perfectly competitive

Gross domestic product is best defined as the:

market value of all final goods and services produced in a country during a period of time

A legally determined maximum that sellers may charge is known as a:

price ceiling

Prolonged shortages arise if:

prices are not allowed to rise to equilibrium

Price controls that put a minimum price on goods and services that is above a free market price create __________.

surpluses

If Americans still worked sixty hour weeks, as they did in 1890, __________.

the GDP would be much higher than it is but the well-being of the typical person would not necessarily be higher