MicroEcon Exam 2 Review
(Figure: Market for TVs 2) Suppose that the world price of TVs is $400, and the government imposes a $100 tariff. According to the figure, the tariff causes total surplus to decrease by: -$1,500,000. -$3,000,000. -$4,500,000. -$6,000,000.
$1,500,00
(Figure: Market for Pants) According to the figure, if there is international trade in this market, and the world price of a pair of pants is $30, the value of the consumer surplus is: -$1,600,000. -$800,000. -$3,600,000. -$1,800,000.
$1,800,000.
Ang can mow the lawn in two hours. Bill takes three hours to mow the same lawn. What can you conclude from this information? -Ang has a comparative advantage over Bill in mowing the lawn. -Bill has a comparative advantage over Ang in mowing the lawn. -Ang has an absolute advantage over Bill in mowing the lawn. -Bill has an absolute advantage over Ang in mowing the lawn.
Ang has an absolute advantage over Bill in mowing the lawn.
Suppose that one hour of labor in Singapore can produce 20 computers or 40 cellphones. Further, suppose that one hour of labor in Ireland can produce 10 computers or 15 cellphones. _____ has a comparative advantage in the production of computers. _____ has a comparative advantage in the production of cellphones. -Singapore; Singapore -Ireland; Ireland -Singapore; Ireland -Ireland; Singapore
Ireland; Singapore
Which of the following illustrates a positive externality? -Martin's company experiences an increase in profits due to his cost-cutting initiatives. -Artem loses sleep when an airport is built near his home, and planes fly overhead. -The value of Maria's house rises when the city builds a park nearby, enhancing her view. -Ella can buy a shirt at half price because someone else returned it.
The value of Maria's house rises when the city builds a park nearby, enhancing her view.
Katie is much faster than her husband, Brett, at putting up a tent and starting a fire. Who should take care of these tasks on their camping trip if they want to maximize their time sitting around a campfire? -They each have a comparative advantage in a particular task, and they should focus on doing that. Katie can help Brett when she finishes her task. -They should complete both tasks together, sharing all the work. -Katie should complete both tasks because she is a more efficient worker. Brett could watch and learn from her. -Katie should be in charge, directing the work while Brett does it.
They each have a comparative advantage in a particular task, and they should focus on doing that. Katie can help Brett when she finishes her task.
Which of the following is NOT a source of comparative advantage? -specialized skills -mass production -abundant inputs -global supply chains
global supply chains
(Figure: Market for Child Care) Refer to the market for child care that is shown in the figure. The original equilibrium price is $10,000. A subsidy is now introduced for parents who pay for child care. The amount of the subsidy is: -$9,000. -$2,000. -$1,000. -$11,000.
$2,000
(Figure: Market for Pants) According to the figure, if there is international trade in this market, and the world price of a pair of pants is $30, the value of the domestic producer surplus is: -$1,600,000. -$800,000. -$400,000. -$200,000.
$200,000.
Suppose that the world price of TVs is $400, and the government imposes a $100 tariff. The new price domestic consumers pay for a TV is: -$400. -$500. -$600. -$700.
$500
(Table: Four Persons) The table lists the minutes that it will take four persons to wash a car and to sort and fold a load of laundry. Use the data to answer the question. Who has a comparative advantage in sorting and folding a load of laundry? -Asad -Junko -Jason -Jen
Asad
Explain how it is possible for an exporting country to realize a net increase in economic surplus if economic surplus decreases for domestic consumers.
Exporting goods and services leads to higher prices in the domestic market. This leads to lower economic surplus for domestic consumers but higher economic surplus for domestic producers. The increase in economic surplus for producers is greater than the loss in surplus for consumers, so the country experiences a net gain in economic surplus.
Which of the following statements is based on normative analysis? -We should protect the environment. -The temperature in the office room is 22 degrees centigrade. -When the burner beneath a pot of water on the stove is turned on, the water will heat up. -Mario is 24 years old.
We should protect the environment.
People gain consumer surplus when they purchase an item: -at a price below the value of the benefit they receive from the item. -at an equitable price. -at a price above marginal revenue but lower than the cost of production. -with a marginal benefit below the price of the item.
at a price below the value of the benefit they receive from the item.
In a market system, public goods would: -be underproduced. -be overproduced. -lack demand. -have no costs.
be underproduced.
When trade is voluntary, neither the buyer nor the seller will: -gain from the trade. -generate surplus. -be worse off after the trade. -need to make any payments.
be worse off after the trade.
When trade is based on comparative advantage -producers lose if they become more specialized. -any gains from trade are equally shared across the trading partners. -one trading partner may gain at the expense of the other. -both trading partners end up better off than when there is no trade.
both trading partners end up better off than when there is no trade.
The economic burden of a tax is the: -government-designated burden of a tax payment. -burden created by the change in after-tax prices faced by buyers and sellers. -percentage increase in the tax on an item. -laws governing sales taxes in a country.
burden created by the change in after-tax prices faced by buyers and sellers.
A good that is excludable but nonrival in consumption is known as a _____ good. -public -club -private -proprietary
club
When the price elasticity of demand is _____ relative to the price elasticity of supply, then buyers bear _____ of the economic burden of a tax. -small; all -small; none -large; a smaller share -large; a bigger share
large; a smaller share
Quotas change _____, and taxes change _____ when they are used to deal with externalities. -costs; quantity -price; costs -price; quantity -quantity; price
quantity; price
Externalities tend to occur because decision makers consider _____ and do NOT consider _____. -their own needs as most important; the fact that others also have needs -their own income as limitless; their income as limited -the welfare of others; their own welfare -their own costs and benefits; the effects of their actions on others
their own costs and benefits; the effects of their actions on others
Normative analysis is analysis that focuses on: -identifying cyclical patterns that are repetitive. -what has happened and how the past varies from the present. -actual relationships, predictions of what will happen, and what the situation is. -what should happen or what ought to be, and it involves value judgments.
what should happen or what ought to be, and it involves value judgments.
The efficient quantity prevails in a market when the market: -has the lowest average cost. -has benefit equal to cost. -yields the largest possible economic surplus. -costs exceed benefit by the largest margin.
yields the largest possible economic surplus.
Carlos buys six new plants for his garden. If he has purchased according to the rational rule, his consumer surplus on the sixth plant is equal to: -total benefit minus price. -price plus marginal benefit. -price minus marginal cost. -zero.
zero
(Figure: Market 3) Use the graph to answer the question. The graph shows the marginal social cost, demand, and supply curves in the cinnamon roll market. A corrective tax of _____ per unit will move the cinnamon roll market to the socially optimal output of _____ units. -$3; 12 -$2; 12 -$4; 8 -$2; 8
$2; 8
(Figure: Market 2) Use the market graph for pairs of socks to answer the question. The sock market is at equilibrium. How much producer surplus is being generated in the sock market? -$15 -$30 -$45 -$60
$30
(Figure: Market) Use the bath towel market graph to answer the question. The bath towel market is at equilibrium. Producer surplus is ____ and economic surplus is ______. -$15; $60 -$30; $60 -$30; $90 -$60; $120
$30; $60
Chin purchases five protein bars at a price of $3 each. The marginal benefit he receives from each bar is $5 for the first bar, $4.50 for the second bar, $4 for the third bar, $3.50 for the fourth bar, and $3 for the fifth bar. The marginal cost of producing the bars is $2.50 each. What is Chin's total consumer surplus from the five bars that he purchased? -$0 -$.50 -$2.50 -$5
$5
(Figure: Market for Pants) According to the figure, if there is no international trade in this market, the value of the domestic producer surplus is: -$1,600,000. -$800,000. -$2,500,000. -$1,250,000.
$800,000.
(Figure: Market for Logs) Suppose that the government is trying to decide between taxes and quotas in order to limit the use of forest wood. Refer to the graph that shows the market for logs of forest wood. The government has set a goal of reducing the consumption of forest wood to 8,000 logs per month. (a) What is the amount of the tax (per 1000 logs) that would achieve the goal? (b) If the government sets a quota at 8,000 logs per month, how much will consumers end up paying?
(a) $6,000 ($21000-$15000) (b) $21,000
(Table: Cooking time). The table provides data on how long it takes Marla and Jason to cook lasagna and cook chicken curry. Marla's opportunity cost of making lasagna is _____, and Jason's opportunity cost is _____. -.75 of an hour; .33 of an hour -.75 of a chicken curry; .33 of a chicken curry -1.33 hours; three hours -1.33 chicken curries; three chicken curries
1.33 chicken curries; three chicken curries
(Figure: Market 4) Use the graph to answer the question. The graph shows the marginal social benefit, demand, and supply curves in the milkshake market are in the graph. What are the socially optimal quantity and price? -12; $3 -8; $2 -12; $1 -8; $4
12; $3
(Figure: Market for Pesticides) In the market for pesticides shown here, the original equilibrium price is $25. In an effort to reduce the usage of pesticides, a tax is then placed on the buyers in this market. The economic burden of this tax on the buyer is $ _____. -7 -8 -2 -6
2
(Figure: Market for TVs 2) According to the figure, if there is international trade in this market, and the world price of televisions is $400, domestic consumers will purchase _____ units from domestic producers and _____ units from foreign producers. -20,000; 30,000 -20,000; 60,000 -40,000; 30,000 -40,000; 60,000
20,000; 60,000
(Figure: Market for Sustainable Furniture) Consider the market for furniture made from sustainable, man-made forests that is shown in the figure. The government wants to encourage buyers to buy such furniture and places a price ceiling of $250 on the market. After the implementation of the price ceiling, the market quantity sold falls by _____ thousand units. -400 -300 -200 -500
200
(Figure: Market 8) Use the graph to answer the question. The graph shows the marginal social cost, marginal private cost, and demand curves in the aux cable market. If the government uses a quota to control an externality in this market, what quantity would be chosen as a limit on sales? -2 -4 -6 -12
4
(Figure: Market for Pesticides) In the market for pesticides shown here, the original equilibrium price is $25. In an effort to reduce the usage of pesticides, a tax is then placed on the buyers in this market. The economic burden of this tax on the seller is $ _____. -7 -8 -6 -2
6
(Figure: Market) Use the graph to answer the question. The graph shows the marginal social cost, demand, and supply curves in the jigsaw puzzle market. If market forces prevail, this market will produce and sell _____ units of output at a price of _____. -6; $6 -4; $8 -6; $8 -8; $4
6; $6
(Figure: Market for TVs 2) According to the figure, if there is international trade in this market, and the world price of a television is $400, the quantity demanded is _____, and the quantity supplied is _____ at the world price. -80,000; 20,000 -20,000; 80,000 -40,000; 70,000 -70,000; 40,000
80,000; 20,000
(Figure: Market 3) Use the graph to answer the question. The graph shows the marginal social cost, demand, and supply curves in the salad dressing market. In this market, the socially optimal output is _____, and the market-determined output is _____. -12; 3 -4; 8 -8; 2 -8; 12
8; 12
How do rice farmers in rural Indonesian villages figure out that they need to produce more rice when the demand for it has risen in other parts of the world? -A decrease in sales communicates to them that they need to advertise more. -An increase in sales communicates to them that inventories are rising. -A decrease in the price of rice gives them a signal that there is insufficient quantity. -An increase in the price of rice gives them a signal that rice is more valuable.
An increase in the price of rice gives them a signal that rice is more valuable.
Bae is willing to pay up to $160 for a particular pair of boots. She is able to buy the boots for $120. The marginal cost of producing the boots is $70. Which of the following is TRUE regarding the economic surplus associated with her purchase of the boots? -Consumer surplus is $40, and producer surplus is $50. -Consumer surplus is $50, and producer surplus is $40. -Consumer surplus is $90, and producer surplus is $120. -Consumer surplus and producer surplus are the same.
Consumer surplus is $40, and producer surplus is $50.
(Figure: Market 6) Use the market graph to answer the question. How much economic surplus is being generated in this market if the market price is $4? Explain how you calculate the amount.
Economic surplus can be calculated by adding consumer surplus and producer surplus. The formula for consumer surplus is the area of the triangle between the demand curve and the $4 price going from a quantity of zero to five. This area would be calculated as (1/2 × 5) × ($7 - $4) = 2.5 × $3 = $7.50.The producer surplus is the area of the triangle between the supply curve and the price of $4 between quantities of zero and five. This area would be calculated as (1/2 × 5) × ($4 - $1) = 2.5 × $3 = $7.50.Economic surplus is the sum of the consumer surplus and the producer surplus, or $7.50 + $7.50 = $15.
Which of the following statements describes the Coase Theorem? -If bargaining is costless, and property rights are clearly established and enforced, then externality problems can be solved through private bargaining. -Even if bargaining is not costless, and property rights are unclear, externality problems can be solved through private bargaining. -If the marginal benefit of a good exceeds the good's marginal cost, more of it should be produced. -Elimination of an externality is possible only when the marginal benefit of a good is no higher than its marginal cost.
If bargaining is costless, and property rights are clearly established and enforced, then externality problems can be solved through private bargaining.
The price of celery rises, but nothing has changed on the supply side of the market. What does this mean to celery farmers? -Celery production should be increased because the number of producers has fallen. -Celery production should be reduced because the number of producers has risen. -It is a signal that celery is more valuable to consumers than it was before. -It is a signal that they should reduce celery production because it is too expensive for consumers.
It is a signal that celery is more valuable to consumers than it was before.
(Figure: Demand Curve 4) Jane's demand curve for a particular candy bar is shown below. Use the graph to answer the question. The candy bar has a price of $4, and Jane buys FOUR bars. Explain why Jane earns consumer surplus on all but her last candy bar.
Jane's consumer surplus on each bar is the amount by which her willingness to pay, or marginal benefit, exceeds the price she must pay. She is willing to pay more than $4 for her first, second, and third bars, and so she earns consumer surplus on those bars. The most she is willing to pay for a fourth bar is $4, so she does not earn any surplus on her fourth bar. On her fourth bar, the extra benefit she receives is worth exactly the $4 she pays for the bar.
(Figure) The table provides data on the minutes it takes for Mara and Nishan to change the sheets on all the beds in the house and to fix dinner. Use the data to answer the essay question. Who has a comparative advantage each task? Use the data to explain how you arrived at this conclusion.
Mara has a comparative advantage in changing the sheets, and Nishan has a comparative advantage in fixing dinner. People have a comparative advantage in a task if they have a lower opportunity cost in performing the task than other producers. Opportunity cost is measured by how much of the other product must be given up for every unit of a product that is produced. It takes 90 minutes for Mara to change the sheets on all the beds. This is 90 minutes she cannot spend fixing dinner. In 90 minutes, she could fix three-quarters of a dinner (based on 90/120). Nishan gives up the chance to fix one whole dinner when he changes the sheets (based on 60/60). Mara has a lower opportunity cost, so she has the comparative advantage in changing sheets. Every time Mara fixes dinner, 120 minutes are not available for changing the sheets. This means that she gives up the chance to change the sheets 1.33 times for every dinner she prepares (based on 120/90). Nishan gives up changing the sheets just once (based on 60/60) for every meal he prepares. Thus, Nishan has a lower opportunity cost in fixing dinner than Mara does. Nishan has a comparative advantage in fixing dinner.
(Table: Cooking time) The table provides data on how long it takes Marla and Jason to cook lasagna or chicken curry. Which statement explains who has a comparative advantage in cooking lasagna? -Marla because she has a lower opportunity cost than Jason. -Jason because he has a lower opportunity cost than Marla. -Marla because she can cook lasagna faster than Jason. -Jason because he can cook lasagna faster than Marla.
Marla because she has a lower opportunity cost than Jason.
One hour of labor in Mexico can produce 10 avocados or 20 bananas. One hour of labor in Canada can produce four avocados or 16 bananas. _____ has a comparative advantage in the production of avocados. _____ has a comparative advantage in the production of bananas. -Mexico; Canada -Canada; Mexico -Mexico; Mexico -Canada; Canada
Mexico; Canada
Which of the following statements is TRUE regarding comparative advantage and absolute advantage? -People can have a comparative advantage without having an absolute advantage in a task. -People can have a comparative advantage only if they also have an absolute advantage in a task. -People can have an absolute advantage only if they also have a comparative advantage in a task. -People can have no comparative and no absolute advantages in any of the tasks.
People can have a comparative advantage without having an absolute advantage in a task.
Which of the following is FALSE regarding public goods? -The fact that the government should fund a public good doesn't mean that the government should produce it. -The fact that the government provides it doesn't mean that it is a public good. -The fact that something is a public good doesn't mean it is nonrival. -The fact that something is a public good doesn't mean that the government should fund it.
The fact that something is a public good doesn't mean it is nonrival.
Margarite opened a successful restaurant two years ago on a block of connecting row houses. All of the other businesses on the block are well-established accounting and law offices. Those businesses have complained that the garbage bins in back of the restaurant are attracting mice, rats, and stray cats and dogs and that they are spending more and more on exterminators. In economic terms, what is happening? -The other businesses on the block are dealing with a marginal social cost because Margarite considers only her marginal external cost as she makes decisions. -The other businesses on the block are dealing with an externality because Margarite considers only her marginal private costs as she makes decisions. -Margarite is creating an externality that is imposing marginal private costs on the other businesses on her block. -Margarite is creating marginal private costs that are adding internal costs to the other businesses on the block.
The other businesses on the block are dealing with an externality because Margarite considers only her marginal private costs as she makes decisions.
Pedro attends a university that requires all students, faculty, and staff to have antivirus software on their personal computers and even provides — at no cost to students, faculty, and staff — antivirus software for their personal computers. Why would the university pay for the protection for the personal computers of students, faculty, and staff?
This is an example of company rules targeting externalities. If one person (students, faculty, or staff) gets a virus, that one person a problem that can make the use of his or her private computer more difficult. However, if one person's computer gets a virus, he or she can inadvertently share the virus with others whenever he or she has virtual contact with them through the infected computer. This is a negative externality when it impacts others. When students, faculty, or staff share files, viruses can be spread. If students, faculty, or staff share files from a home computer or through a home computer to a campus computer or system, a virus can be spread to the campus system of computers. For example, a student could upload a file to the university learning management system, or a faculty member or staff member could reply to a student email from a home computer. Once the virus is in the university system, it can spread and be difficult for the university to eradicate. Thus, it is simpler for the university to minimize the risk by paying for all students, faculty, and staff to have antivirus software on their personal or home computers.
(Table: Joachim and Zane's opportunity cost) The table shows data on how long it takes Joachim and Zane to clean the bathrooms and wash the windows at a home. Who has a comparative advantage in washing windows? -Zane because he has absolute advantage. -Joachim because he has absolute advantage. -Zane because he has a lower opportunity cost. -Joachim because he has a lower opportunity cost.
Zane because he has a lower opportunity cost.
(Figure: Market for Pants) The world price of a pair of pants is $30. According to the figure, opening up to international trade will lead to _____ in the domestic producer surplus and _____ in the domestic consumer surplus. -an increase; an increase -an increase; a decrease -a decrease; an increase -a decrease; a decrease
a decrease; an increase
Which of the following would be MOST likely to support an increase in barriers to international trade? -a firm in an export-intensive industry -a firm in an export-oriented industry -a firm in an import-competing industry -a firm in an import-dependent industry
a firm in an import-competing industry
An import quota is: -a tax on imported products. -a limit on the quantity of a good that can be imported. -the revenue received from a tariff. -the cost of imposing a tariff.
a limit on the quantity of a good that can be imported.
(Figure: Market for Sustainable Furniture) The graph depicts the market for furniture made from sustainable, man-made forests. The government wants to encourage buyers to buy such furniture and imposes a price ceiling of $250. What occurs as a result of the price ceiling? -a shortage of 400,000 pieces of furniture. -a shortage of 200,000 pieces of furniture. -a surplus of 300,000 pieces of furniture. -a surplus of 400,000 pieces of furniture.
a shortage of 400,000 pieces of furniture.
A binding price floor leads to: -a shortage. -a surplus. -an equilibrium. -a low price.
a surplus
(Figure: Market for Pants) Suppose that the world price of a pair of pants is $30. According to the figure, the country will be an _______ of _____ pairs of pants. -an importer; 60,000 -an exporter; 40,000 -an importer; 40,000 -an exporter; 20,000
an importer; 40,000
Chantelle grows tomatoes and sells them at the farmer's market. Because the price of tomatoes rises, she is encouraged to grow and sell more. This is an example of price functioning as -a bundle of information. -a currency. -an incentive. -a signal.
an incentive
Giselle buys doughnuts for breakfast once a week. The price of doughnuts falls, and the lower price induces her to buy doughnuts twice a week. This is an example of price functioning as -an incentive. -an advertisement. -a signal. -a bundle of information.
an incentive
In 2004, Kenya became the first country to abolish the sales tax on menstrual products. The effect of this tax repeal would be: -an increase in prices for consumers. -a decrease in profits for sellers. -an increase in sales of menstrual products. -a reduction of taxes on other products in the market.
an increase in sales of menstrual products.
You have a comparative advantage if you can complete a task: -using more inputs than anyone else. -using fewer inputs than anyone else. -at a lower opportunity cost than anyone else. -at a higher opportunity cost than anyone else.
at a lower opportunity cost than anyone else
What type of good is rival and nonexcludable? -private goods -club goods -common resources -public goods
common resources
In 2018, the state of Kentucky raised the tax on cigarettes by 50 cents per pack. Holding all else constant, the effect of this tax would be to _____ in Kentucky. -decrease prices of cigarettes -increase sales of cigarettes -increase profits for stores selling cigarettes -decrease smoking of cigarettes
decrease smoking of cigarettes
(Figure: Market for TVs 2) The world price of televisions is $400. According to the figure, opening up to international trade will _____ the domestic producer surplus and _____ the domestic consumer surplus. -increase; increase -increase; decrease -decrease; increase -decrease; decrease
decrease; increase
Buyers bear a smaller incidence of the tax when: -the tax is higher. -supply is more elastic than demand. -demand is more elastic than supply. -demand is perfectly inelastic.
demand is more elastic than supply.
A key difference between equity and efficiency is that equity deals with _____ and efficiency focuses on _____. -equality; minimizing costs -minimizing costs; equality -maximizing welfare; fairness -fairness; maximizing economic surplus
fairness; maximizing economic surplus
(Figure: Labor Market) Refer to the labor market shown here. Suppose a minimum wage of $18 per hour is introduced. After the implementation of the minimum wage, the number of workers hired _____. -falls by 12,000 -falls by 6,000 -rises by 6,000 -rises by 10,000
falls by 6,000
To maximize production, people should -focus on the task in which they have an absolute advantage. -focus on the task in which they have a comparative advantage. -learn all the skills so that they can perform any task needed. -focus on improving their weakest skills.
focus on the task in which they have a comparative advantage.
(Figure: Market 5) Use the graph to answer the question. The graph shows the marginal social benefit, demand, and supply curves in the toothbrush market. Market forces would yield a quantity of _____, whereas the socially optimal quantity is _____. -four; six -eight; four -six; four -four; eight
four; six
(Figure: Market) Refer to the graph. Suppose that a binding price floor of $35 is removed. The number of consumers who are able to purchase the product will: -decrease from 40 to 35. -decrease from 50 to 25. -increase from 30 to 50. -increase from 25 to 50.
increase from 25 to 50.
A corrective tax designed to resolve a negative externality problem is typically set at an amount equal to the _____ cost. -marginal social -marginal external -total externality -total social
marginal external
Helena works in a factory that makes plastic phone cases. The four main tasks are mixing, molding, curing, and polishing. Out of all the workers, she is the fastest mixer, has the lowest opportunity cost for molding, is the most careful in curing, and enjoys polishing the most. If her manager makes assignments in a way that maximizes output, then she will be assigned to -mixing. -molding. -curing. -polishing.
molding
(Figure: Marginal Benefit Curves 2) Use the graph for marginal benefit curves for cans of shaving cream to answer the question. When the market price is $2, how many cans will be purchased across Bruno and Martin? -six -seven -nine -ten
nine
A market with negative externalities will tend to _____ compared to a market producing the socially optimal output. -underproduce and sell at a higher price -overproduce and sell at a higher price -underproduce and sell at a lower price -overproduce and sell at a lower price
overproduce and sell at a lower price
(Figure: Market for Reusable Jute Shopping Bags) Refer to the market for reusable jute shopping bags that is shown in the figure. The original equilibrium price is $7 per bag. A subsidy is now introduced for buyers of the bags. As a result of the subsidy, the equilibrium quantity in the market _____ by _____ units. -rises; 7,000 -falls; 1,000 -rises; 1,000 -falls; 6,000
rises; 1,000
A market's deadweight loss is calculated as: -the economic loss that a firm has when it is not producing its profit-maximizing output. -the loss to consumers when a product malfunctions or fails to meet expectations. -the economic surplus at the efficient quantity minus the economic surplus at the actual quantity. -the price at equilibrium minus the price at actual quantity.
the economic surplus at the efficient quantity minus the economic surplus at the actual quantity.
Competitive markets do NOT result in: -the largest possible economic profit for firms. -goods going to the consumers who will receive the highest marginal benefit from the good. -the largest possible economic surplus. -goods produced at the lowest possible marginal cost.
the largest possible economic profit for firms.