Micro 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 other goals.

If there is excess demand in a market, then this suggests that:

there is an opportunity for mutually beneficial trades.

Which of the following statements about implicit costs is true?

they measure the forgone opportunities of the firm's owners

Which of the following is NOT necessarily true in a market equilibrium?

Both rich and poor have adequate access to the good

Duke is a highly skilled negotiator who could work for many law firms. The law firm that hires Duke is able to collect twice as much revenue per hour of Duke's time than it can for any other negotiator in town. The increased revenue will:

all go to Duke because, if it didn't, another firm could hire Duke away.

A market equilibrium is only efficient if

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

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 perfectly competitive markets, 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.

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.

Adam Smith's theory of the invisible hand posits that the most efficient allocation of resources is 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 owner's 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