FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 12: Competition and the Invisible Hand

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 61

Multiple Choice

Review LaterAdd Note

Review Later

The Invisible Hand Property 2 suggests that:

A) profits across competitive industries will be different.
B) profits across competitive industries will be identical.
C) unprofitable industries will grow at the expense of other more profitable industries.
D) capital and labor can only move within a given industry.

E) A) and B)
F) B) and D)

Correct Answer

verified

Show Answer

Question 62

Multiple Choice

Review LaterAdd Note

Review Later

Outcomes that people neither intend nor design:

A) are always undesirable.
B) can be desirable with the right institutions.
C) are always desirable.
D) are impossible.

E) B) and C)
F) A) and D)

Correct Answer

verified

Show Answer

Question 63

True/False

Review LaterAdd Note

In markets for public goods, the invisible hand concept does not work in society's best interest.

Use the following to answer questions: Figure: Light Bulbs -(Figure: Light Bulbs) What price of light bulbs would induce the firms in this diagram to minimize total production costs while maintaining the same total output?

According to the elimination principle, firms enter a market when ______ and exit a market when ______.

"[I]n capitalist reality as distinguished from its textbook picture, it is not that kind of competition which counts but the competition from the new commodity, the new technology, the new source of supply, the new type of organization...competition which commands a decisive cost or quality advantage and which strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives." This process is called:

Which of the following best illustrates the elimination principle?

Suppose that Sandy owns a farm in North Carolina and Pat owns a farm in Iowa, and Sandy's farm is generally more productive than Pat's. If both Sandy and Pat sell their corn in the same market, Sandy should produce the output at the marginal cost that is:

If a firm has revenues of $100, explicit costs of $50, and implicit costs of $50, its economic profit is:

A small island nation produces only boxes of macaroni and cheese, most of which it sells in the export market. The world price per box is $10, regardless of the quantity exported. The nation has three macaroni and cheese factories, each of which varies in efficiency and each has rising marginal costs. To profit the most as a country, what would this nation do?

Explain the term creative destruction. In particular, explain what is being "created" and what is being "destroyed."

If the presence of externalities clouds the signals that prices give in respect to costs and benefits,:

The elimination principle suggests that:

Consider two farms. Farm 1 produces unlimited bushels for a cost of $5 each. Farm 2 produces unlimited bushels for a cost of $7 each. How should production be allocated between these two farms?

If the marginal cost of production at Firm 1 is less than the marginal cost of production at Firm 2 but the overall costs of production are lower on average at Firm 2, then:

Suppose there are two firms in an industry (Farm 1 and Farm 2). For every level of output, Farm 1 has higher marginal cost of production than Farm 2. Would it ever make sense for Farm 1 to produce in this industry? Explain.

If firms do not coordinate with each other, it is hard for free markets to equalize marginal costs of production across firms.

Which of these equations describes the Invisible Hand Property 1 regarding the minimization of total industry costs?

Stating that marginal revenue equals price is equivalent to saying that marginal cost equals price for the profit maximizing quantity.

Consider two farms. Farm 1 produces the first bushel for $5 each, but the marginal cost rises gradually as the quantity increases. Farm 2 produces the first bushel for $7, but marginal cost also rises gradually as the quantity increases. With a market price of $10 a bushel, how should production be allocated between these two farms?