ECO2023 Ch.12 E

Firms in perfect competition produce the productively efficient output level in the short run and in the long run.

false

In the long​ run, perfect competition

results in allocative efficiency because firms produce where price equals marginal cost.

Does the market system result in productive​ efficiency? In the long​ run, perfect competition

results in productive efficiency because firms enter and exit until they break even where price equals minimum average cost.

Briefly discuss the difference between productive and allocative efficiency

Productive efficiency pertains to production within an industry while allocative efficiency pertains to production across all industries.

​Long-run equilibrium in perfect competition results in

allocative and productive efficiency

Which of the following describes a situation in which every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing​ it?

allocative efficiency

Which of the following terms best describes a state of the economy in which production reflects consumer​ preferences?

allocative efficiency

Perfect competition leads to allocative and productive efficiency

because prices reflect consumer preferences. because firms are motivated by profit.

Allocative efficiency is when every good or service

is produced up to the point where price equals marginal cost

A perfectly competitive firm in long−run equilibrium produces output at the lowest possible average total cost.

true

Productive efficiency is

when a good or service is produced at lowest possible cost.

Assume the market for oranges is perfectly competitive. If the demand for oranges​ increases, then the market

will supply additional oranges because producers seek the highest return on their investments

Are perfectly competitive markets allocatively efficient in the long​ run?

yes, because firms produce where the marginal benefit to consumer equals the marginal cost of production