FIGURE 12- 1 Consider Three Firms,A,B and C,all Producing Kilos

question 14

Multiple Choice

FIGURE 12- 1 Consider three firms,A,B and C,all producing kilos of potatoes (per year) in a perfectly competitive market.The diagrams below show marginal cost curves for each of the three firms.

-Refer to Figure 12- 1.Suppose each of Firms A,B,and C are producing 500 kilos of potatoes.Is this industry allocatively efficient?

• A)It is not possible to say whether this industry is allocatively efficient because we do not know the average costs for each firm.
• B)No,because the marginal cost curve for each firm has a different slope.
• C)Yes,because output is equated for all firms.
• D)It is not possible to say whether this industry is allocatively efficient because we do not know the market price for kilos of potatoes.
• E)No,since marginal costs are not equated for all firms,the industry is not productively efficient,and thus cannot be allocatively efficient.

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Definitions:

Generalizations

Broad statements or conclusions derived from specific instances or limited data, often used to simplify understanding of complex concepts.

Abstractions

Simplified representations or models of complex realities, used to understand and predict behaviors in various disciplines.

Marginal Benefit

The incremental benefit or satisfaction obtained from consuming one additional unit of a particular good or service.

Marginal Cost

The additional cost incurred to produce one more unit of a good or service, important for decision-making in production and pricing strategies.