The term productive efficiency refers to: |
-the production of a good at the lowest average total cost |
Assume a purely competitive, increasing-cost industry is in long-run equilibrium. If a decline in demand occurs, firms will: |
-leave the industry and price and output will both decline |
Resources are efficiently allocated when production occurs where: |
-price is equal to marginal cost |
The term Allocative efficiency refers to: |
-the production of the product mix most desired by consumers |
A constant-cost industry is one in which: |
-if 100 units can be produced for $100, then 150 can be produced for $150, 200 for $200, and so forth |
Long-run competitive equilibrium: |
-results in zero economic profits |
If for a firm P= minimum ATC=MC then: |
-both Allocative efficiency and productive efficiency are being achieved |
Allocative efficiency occurs whenever: |
-it is impossible to produce a net benefit for society by changing the combination of goods and services produced |
Creative destruction is: |
-the process by which new firms and new products replace existing dominant firms and products |
In a decreasing-cost industry: |
-lower demand leads to higher long-run equilibrium prices |
Microeconomics chapter 11
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