Micro exam 2 assignment 5

if it is possible to make a change that will help some people without harming others, then the situation is

inefficient

unlike economic profit, economic rent

may not be driven to zero by competition

efficiency is an important goal because when markets are efficient

there are more resources available to achieve goals

What is a true statement about implicit costs

they measure the forgone opportunities of the firm's owners

a market equilibrium is only efficient if

all relevant costs and benefits are reflected in the market supply and demand curve

the role that prices play in directing resources away from overcrowded markets and towards markets that are underserved is known as the _______ function of price

allocative

the allocative function of price cannot operate unless there is

both free entry and free exit

in a perfectly competitive market, an implication of entry and exit in response to economic profit and loss is that

firms will earn zero economic profit in the long run

Curly told Larry about his new business venture: Curly pays Acme International $1,000 per month for supplies, works out of his apartment on his own computer and earns a monthly revenue of $1,500. Should Larry quit his job and do what Curly does?

not if Larry is earning more than $500 per month at his current job

a situation is efficient if it is

not possible to find a transaction that will make at least one person better off without harming others

if there is excess demand in a market, then this suggests

that there is an opportunity for mutually beneficial trades

Adam Smiths theory of the invisible hand posits that the most efficient allocation of resources if often achieved by

the actions of independent, self-interested buyers and sellers

economic rent is

the difference between the payment made to the owner of a factor of production and the owners reservation price

if the market supply curve does not capture all of the costs to society of producing an additional unit of good, then

the market equilibrium will not be efficient