Use the three basic questions to describe why perfect competition is efficient
What will be an ideal response?
In perfect competition, price is equal to marginal cost. Price reflects the willingness to pay of buyers, while the marginal cost is the opportunity cost of the resources needed to produce the good. Thus, the goods produced will be the ones that buyers want. In addition, resources will be allocated efficiently among firms because firms must minimize the cost of production to maximize profit. Last, competitive free markets ensure that the goods will be distributed to the households in an efficient manner. Households will buy an item if it generates a greater (or equal) amount of utility than its price. As long as households can choose freely how to spend their income, they will not end up with the wrong items.
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The Q-theory of investment
A) suggests that a downturn in real GDP will lead to a sharp fall in investment, which leads to further reductions in GDP through the multiplier. B) emphasizes the role of real interest rates and taxes. C) emphasizes that current investment spending depends positively on the expected future growth of GDP. D) links investment spending to stock prices.
In the above figure, a technologically inefficient point is
A) a. B) e. C) g. D) f.