The perfectly competitive model makes a lot of fairly unrealistic assumptions. Why do economics text books still talk a lot about this model?
A) Many markets are close to being perfectly competitive.
B) It is an important model to use as a benchmark to compare other markets structures to.
C) Perfectly competitive markets maximize societal welfare.
D) All of the above.
D
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Profits represent
A) a reward to entrepreneurs. B) the income earned from a bond. C) the difference between total tax revenue and total government spending. D) the payments firms make to their employees.
Refer to the above figure. We are currently producing at point c. Which of the following statements is TRUE?
A) Resources are not being efficiently utilized. B) Resources are being efficiently utilized. C) The only way to produce more of Goods X or Y is to have an increase in the amount of resources. D) The Law of Increasing Additional Cost does not hold.