micro Ch 7: Perfect Competition and the Invisible Hand
Which of the following terms best refers to a fair distribution of economic benefits?
Equity
Which of the following countries has an economy where most of the resource allocation is determined by a central planning authority?
North Korea
In the short run, the firm should:
Operate if price > average variable cost.
In perfect competition, the marginal revenue is the same as:
Price
When a competitive market is in equilibrium, what is the economically efficient level of output?
The output where marginal cost is exactly equal to marginal benefit
When is output lower than the efficient level?
When marginal benefit is greater than marginal cost
In what type of economy does the government decide how economic resources will be allocated?
a centrally planned economy
For markets to generate the greatest benefit and function in the most efficient manner they must:
be perfectly competitive
Gross domestic product is best defined as the:
market value of all final goods and services produced in a country during a period of time
A legally determined maximum that sellers may charge is known as a:
price ceiling
A legally determined minimum price that sellers must receive is known as a:
price floor
Prolonged shortages arise if:
prices are not allowed to rise to equilibrium
Price performs a(n) __________ function. Inputs or outputs go to the __________ bidders if people are free to exchange voluntarily in the markets without government intervention or other market friction.
rationing, highest
Prolonged agricultural surpluses can arise if governments:
set the price above equilibrium
Price controls that put a price ceiling on goods and services create __________.
shortages
Price controls that put a price floor on goods and services create __________.
surpluses
If Americans still worked sixty hour weeks, as they did in 1890, __________.
the GDP would be much higher than it is but the well-being of the typical person would not necessarily be higher