Chapter 12 Review

_____________ says that even though no actor in a market economy intends to do so, in a free market P = MC1 = MC2 = ... = MCN and, as a result, the total industry costs of production are minimized.

Invisible Hand Property 1

An implication of _________ is that the profit rate in all competitive industries tends toward the same level.

Invisible Hand Property 2

Invisible Hand Property 1 says that even though no actor in a market economy intends to do so, in a free market _________ and, as a result, the total industry costs of production are minimized.

P = MC1 = MC2

There is a tendency for the profit rate in all competitive industries to go to ________ (normal profits).

zero

According to the ________, above-normal profits are eliminated by entry and below-normal profits are eliminated by exit.

elimination principle

In a dynamic economy, there is a constant dance between ________ and ________.

elimination, innovation

According to the elimination principle, above-normal profits are eliminated by _____ and below-normal profits are eliminated by ________.

entry, exit

According to Invisible Hand Property 2, the total value of production is maximized because if the profit rate in one industry were greater than in another, total value would increase if resources were to move from the ______ profitable to the ______ profitable industry.

less, more

the way to minimize the total costs of production is to produce just so much (in each firm or farm or whatever) so that the _______ of production are equalized

marginal costs

Invisible Hand Property 1 says that even though no actor in a market economy intends to do so, in a free market P = MC1 = MC2 = ... = MCN and, as a result, the _________ of production are minimized.

total industry costs of production

In a dynamic economy, entrepreneurs listen to price signals and they move capital and labor from _______ industries to _________ industries.

unprofitable, profitable