Question : 11) Writing in the New York Times the technology boom : 1245282

11) Writing in the New York Times on the technology boom of the late 1990s, Michael Lewis argues, “The sad truth, for investors, seems to be that most of the benefits of new technologies are passed right through to consumers free of charge.” What does Lewis means by the benefits of new technology being “passed right through to consumers free of charge”?

A) Firms in perfect competition are price takers. Since they cannot influence price, they cannot dictate who benefits from new technologies, even if the benefits of new technology are being “passed right through to consumers free of charge.”

B) In perfect competition, price equals marginal cost of production. In this sense, consumers receive the new technology “free of charge.”

C) In the long run, price equals the lowest possible average cost of production. In this sense, consumers receive the new technology “free of charge.”

D) In perfect competition, consumers place a value on the good equal to its marginal cost of production and since they are willing to pay the marginal valuation of the good, they are essentially receiving the new technology “free of charge.”

12) Which of the following does not hold true for a perfectly competitive firm in long-run equilibrium?

A) Its economic profit will be zero.

B) It will minimize average total cost.

C) It will charge a price equal to marginal cost.

D) Marginal cost will be minimized.

13) A perfectly competitive industry achieves allocative efficiency in the long run. What does allocative efficiency mean?

A) Each firm produces up to the point where the price of the good equals the marginal cost of producing the last unit.

B) Each firm produces up to the point where all scale economies are exhausted.

C) Production occurs at the lowest average total cost.

D) Firms use an input combination that minimizes cost and maximizes output.

14) New York Times writer Michael Lewis wrote that “The sad truth, for investors, seems to be that most of the benefits….are passed through to consumers free of charge.” To which of the following did Lewis refer?

A) apple farming in New York State

B) the Enron accounting scandal

C) the medical screening industry

D) new technologies developed in the 1990s

15) When plasma television sets were first introduced prices were high and few firms were in the market. Later, economic profits attracted new firms and the price of plasma televisions fell. This example illustrates

A) a decreasing-cost industry.

B) that consumers receive this new technology “free of charge” in the sense that they only have to pay a price for plasma televisions equal to the lowest production cost.

C) an industry with a low minimum efficient scale.

D) how fickle consumer demands are.

16) Perfectly competitive firms produce up to the point where the price of the good equals the marginal cost of producing the last unit. This condition is referred to as

A) productive efficiency.

B) constant returns to scale.

C) allocative efficiency.

D) perfectly competitive efficiency.

17) Which of the following describes a difference between allocative efficiency and productive efficiency in a perfectly competitive market?

A) Allocative efficiency is achieved only in the long run. Productive efficiency is achieved only in the short run.

B) Allocative efficiency is achieved only in the long run. Productive efficiency is achieved in the short run and the long run.

C) Allocative efficiency is achieved only in the short run. Productive efficiency is achieved only in the long run.

D) Allocative efficiency is achieved in the short run and the long run. Productive efficiency is achieved only in the long run.

18) If a perfectly competitive firm achieves productive efficiency then

A) it will raise its price in order to earn an economic profit.

B) the price of the good it sells is equal to the benefit consumers receive from consuming the last unit of the good sold.

C) it is producing at minimum efficient scale.

D) it is producing the good it sells at the lowest possible cost.

19) If productive efficiency characterizes a market

A) the marginal cost of production is minimized.

B) firms produce the goods that consumers desire most.

C) the output is being produced at the lowest possible cost.

D) firms use the best technology available to produce the good.

20) A teenaged babysitter is similar to a firm in a perfectly competitive industry in that, for both

A) fixed costs are lower than variable costs.

B) there are many other suppliers of similar goods or services.

C) the implicit costs of production exceed the explicit costs of production.

D) average costs of production do not change when their industry expands.