Question :
21) Refer to Figure 12-1. Suppose each of Firms A, : 1384260
21) Refer to Figure 12-1. Suppose each of Firms A, B, and C are producing 500 kilos of potatoes. Which of the following statements correctly describes the productive efficiency of this industry?
A) Productive efficiency would be achieved if Firm B produced all the output, since it has the lowest MC for the production of 500 kilos.
B) It is possible to reduce the total cost of the given output by reallocating production among the three firms.
C) The total output of 1500 kilos is the productively efficient output for this industry, so no reallocation is necessary.
D) It is not possible to say whether this industry is productively efficient because we do not know the market price of the product.
E) It is not possible to say whether this industry is productively efficient because we do not know the average costs for each firm.
22) Refer to Figure 12-1. Suppose each of Firms A, B and C are producing 500 kilos of potatoes. Keeping total output unchanged, what level of output should each firm be producing such that the industry is productively efficient?
A) Firm A: 200 kilos, Firm B: 500 kilos, Firm C: 800 kilos
B) Firm A: 700 kilos, Firm B: 800 kilos, Firm C: 0 kilos
C) Firm A: 500 kilos, Firm B: 800 kilos, Firm C: 200 kilos
D) Firm A: 500 kilos, Firm B: 500 kilos, Firm C: 500 kilos
E) Firm A: 500 kilos, Firm B: 200 kilos, Firm C: 200 kilos
23) 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 market price for kilos of potatoes.
B) It is not possible to say whether this industry is allocatively efficient because we do not know the average costs for each firm.
C) Yes, because output is equated for all firms.
D) No, since marginal costs are not equated for all firms, the industry is not productively efficient, and thus cannot be allocatively efficient.
E) No, because the marginal cost curve for each firm has a different slope.
24) Refer to Figure 12-2. Suppose demand and supply for butter are shown by D and S, respectively. And suppose the economy is at point (a) on the production possibilities boundary. Is this output of guns and butter allocatively efficient?
A) No, because the marginal value to consumers of the butter produced is greater than the marginal cost to producers.
B) No, because the marginal cost to producers of the butter produced is more than the marginal value to consumers.
C) Yes, because all points on the production possibilities boundary are allocatively efficient.
D) Yes, because the marginal cost of producing the butter equals the marginal value of consuming the butter.
E) No, because the marginal costs for guns and butter are not equated.
25) Refer to Figure 12-2. Suppose demand and supply for butter are shown by D and S, respectively. And suppose the economy is at point (a) on the production possibilities boundary. How can this economy move toward allocative efficiency?
A) expand the production possibilities boundary outward
B) increase the supply of guns
C) increase the demand for butter
D) produce less butter, more guns
E) produce more butter, less guns
26) Refer to Figure 12-2. Suppose this economy is allocatively efficient at Q1 units of butter. Now suppose there is an increase in demand for butter from D to D1. After this shift in demand,
A) the supply curve will shift up to S1 and allocative efficiency will be maintained.
B) the marginal value to consumers of butter is less than the marginal cost to producers; the price of butter (relative to the price of guns) rises; the economy moves to output Q2 of butter and point (c) on the PPB.
C) the marginal value to consumers of butter is greater than the marginal cost to producers; the price of butter (relative to the price of guns) rises; the economy moves to output Q2 of butter and point (c) on the PPB.
D) the increase in the price of butter (relative to the price of guns) will cause the demand curve to shift back down to D and allocative efficiency will be maintained.
E) the price of guns (relative to the price of butter) rises and the economy moves to point (a) on the PPB.
27) The Canadian economy is achieving allocative efficiency if
A) price equals average cost in all industries.
B) there are no idle resources in the economy.
C) marginal product is equal for all factors of production.
D) marginal cost equals price in all industries.
E) marginal cost is equalized across industries.
28) An important defence of oligopoly as a market structure is that
A) it involves less allocative inefficiency than monopoly.
B) it results in lower prices than perfect competition.
C) it is the most efficient available alternative when the minimum efficient scale is large.
D) it generates less unused capacity than monopolistic competition.
E) it is more productively efficient than monopoly.
29) Consider the efficiency of various market structures and complete the following sentence. The larger the minimum efficient scale of firms, ceteris paribus, the
A) more likely we are to have a concentrated market and allocative inefficiency.
B) less the tendency toward monopoly inefficiency.
C) lower the advantages of large-scale production.
D) greater the number of firms comprising an industry.
E) more likely firms will display productive efficiency.
30) Traditionally, economists have regarded monopoly as an undesirable market structure because
A) of its ability to minimize costs through large output.
B) it is allocatively inefficient.
C) of its wasteful innovation.
D) it is usually characterized by wastefully confrontational labour relations.
E) it allows producers to earn large profits.
