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Questions and Answers
Equilibrium in a competitive market results in the economically efficient level of output where
Equilibrium in a competitive market results in the economically efficient level of output where
What explains why the ATC and marginal cost curves are U-shaped in the short run
What explains why the ATC and marginal cost curves are U-shaped in the short run
A market demand curve reflects the:
A market demand curve reflects the:
Which of the following statements about monopoly is true?
Which of the following statements about monopoly is true?
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Why might private producers be disinclined to supply public goods?
Why might private producers be disinclined to supply public goods?
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Lattes are priced at $4.00 each, and chocolate chip cookies are priced at $2.00 each. What is the opportunity cost of buying a latte?
Lattes are priced at $4.00 each, and chocolate chip cookies are priced at $2.00 each. What is the opportunity cost of buying a latte?
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What could lead to an inward movement of a nation's production possibility frontier?
What could lead to an inward movement of a nation's production possibility frontier?
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When do you have a comparative advantage?
When do you have a comparative advantage?
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The profit-maximising level of output is
The profit-maximising level of output is
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Australia has a comparative advantage in the production of
Australia has a comparative advantage in the production of
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Study Notes
Market Equilibrium and Efficiency
- Equilibrium in a competitive market results in the economically efficient level of output.
Cost Curves
- The Average Total Cost (ATC) and Marginal Cost (MC) curves are U-shaped in the short run due to diminishing returns and increasing marginal costs.
Demand Curve
- A market demand curve reflects the quantity of a good or service that all consumers are willing and able to purchase at a given price level.
Monopoly
- One true statement about monopoly is that a single firm produces the entire market output.
Public Goods
- Private producers may be disinclined to supply public goods because they are non-rivalrous and non-excludable, making it difficult to charge for them and recover production costs.
Opportunity Cost
- The opportunity cost of buying a latte is the next best alternative that is given up, which is the value of the chocolate chip cookie that could have been purchased instead (in this case, 2 cookies).
Production Possibility Frontier
- An inward movement of a nation's production possibility frontier can be caused by a decline in factors of production, technological regress, or an increase in unemployment.
Comparative Advantage
- You have a comparative advantage when you can produce a good or service at a lower opportunity cost than someone else.
- Australia has a comparative advantage in the production of goods such as minerals, coal, and agricultural products.
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Description
Test your knowledge on how equilibrium in a competitive market leads to the economically efficient level of output. Explore the concept of market equilibrium and its impact on the allocation of resources.
