The Reason Economists Use the Term "Perfect" for Firms That

question 99

Multiple Choice

The reason economists use the term "perfect" for firms that are able to charge each customer a price exactly equal to the price the customer is willing to pay is because it

• A) is a perfect example of capitalism.
• B) always works perfectly,just like the theoretical model.
• C) describes a market outcome that produces no deadweight loss.
• D) charges each customer his or her own perfect price.
• E) works perfectly to benefit the producers selling the product.

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Definitions:

Marginal Cost

The additional cost incurred by producing and selling one more unit.

Fixed-Cost Fallacy

Consideration of costs that do not vary with the consequences of your decision (also known as the sunk-cost fallacy).

Depreciation Costs

The allocation of the cost of a tangible asset over its useful life, representing the decline in value due to wear and tear, age, or obsolescence.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision or choosing to pursue a particular action.