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