Assume Cathy's Cupcake Company operates in a perfectly competitive market producing 10,000 cupcakes per day. At this output level, price exceeds the firm's marginal and average variable costs. It follows that producing one more cupcake will cause this firm's

Consider indifference curves for goods X and Y. Suppose we plot the quantity of good Y on the vertical axis and the quantity of good X on the horizontal axis

a. Why are indifference curves downward sloping? b. What is the economic interpretation of the slope of an indifference curve? c. Following what we learned in the Appendix to this chapter, indifference curves would flatten out as someone consumes more of good X and less of good Y. What are we assuming when we draw indifference curves that become flatter?

Both the perfectly competitive firm and the monopolistically competitive firm produce at the output where marginal revenue equals marginal cost (MR = MC) but only the perfectly competitive firm achieves allocative efficiency

Explain why this is the case.