Potential Output Is

question 26

Multiple Choice

Potential output is

• A) the level of real GDP that exists when the economy is experiencing only cyclical and structural unemployment.
• B) the level of real GDP that exists when the quantity of labor supplied is equal to the quantity of labor demanded.
• C) the level of real GDP that exists when the actual rate of unemployment is zero.
• D) the level of real GDP that exists when the economy is experiencing only frictional and cyclical unemployment.

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Definitions:

Purely Competitive

Characterizes a theoretical market structure emphasizing perfect competition, where numerous small firms face no barriers to entering or exiting the market.

Long Run

A period in which all inputs, including capital, are variable, allowing firms to adjust all factors of production.

Underallocation Of Resources

A situation where resources are not optimally distributed, often leading to inefficiencies and missed opportunities in the market.

Purely Competitive

A market structure characterized by many buyers and sellers, homogeneous products, and the freedom of entry and exit, resulting in firms being price takers.