Assuming that the market for cigarettes is in perfect competition, what does allocative and productive efficiency imply in this case? What does it not imply?

Q: What are the two essential characteristics of a competitive market?

A: ANS A competitive market is a market in which there exist many sellers selling homogeneous goods to…

Q: If firms in a competitive industry incur an economic profit, what happens to supply, price, output,…

A: Economic profit is defined as difference between revenue that is received from the sale of a good or…

Q: How does a competitive firm determine the quantity that maximizes profit?

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Q: Assume perfect competition takes place in the market for hotel rooms. The the current market…

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Q: Show in graph a consumers’ surplus when the market is perfectly competitive and when its monoplized.

A: A perfectly competitive market refers to market where a large number of buyers and sellers exist. A…

Q: Why do economists believe that economic profit is the more accurate measure of a business success?…

A: Accounting profit only considers the cost that has actually happened, but economic profit considers…

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Q: Why can't firms enter the market in the short-run?

A: There are various types of market structures which have different characteristics of the number of…

Q: With the aid of relevant graphs, elaborate on how prices are set in a perfectly competitive marke

A: Perfect or pure competition is a form of market in which a large number of perfectly informed buyers…

Q: Explain how a firm chooses a level of output to maximise profit

A: The profit maximization refers to a situation where the firm is earning the maximum possible profits…

Q: Distinguish the difference between the market demand curve and the demand curve that a particular…

A: Market demand curve: The market demand curve shows the total quantity demanded at a given price by…

Q: True or false  b. Charging a price greater than marginal cost leads to maximum efficiency  c. In…

A: There are various types of market structures. These are monopoly, monopolistic competition, perfect…

Q: What are the characteristics of a perfectively competitive market?

A: There are different market structures with different characteristics.

Q: Under what conditions will a firm exit a market? Explain theoretically and graphically.

A: Short‐run supply curve- The short‐run supply curve of the firm is the portion of its marginal cost…

Q: How is non-price competition different from price competition?

A: There are two ways producers can compete (with their aim being profit maximization). They are: Price…

Q: Using graph, explain when the firm in a competitive market is in equilibrium?

A: A market is a place where the buyers and the sellers interact with each other and the exchange of…

Q: Why are sellers in perfect competition unable to increase prices?

A: Perfect competition is a market structure characterized by large number of firms selling homogenous…

Q: What are the options available to a firm when the market demand exceeds capacity?

A: Here's a set of features that assist companies in proactively addressing excess demand and…

Q: Find supporting evidence that competition makes markets more efficient in this case.

A: Competition arises when the number of sellers in the market increase, as more firms join an industry…

Q: What does acceptable loss mean for a competitive firm? Explain and Draw a graph

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Q: Will a perfectly competitive market display allocative efficiency? Why or why not?

A: ANS Allocative Efficiency occurs when the total surplus is maximized. Where the total surplus is…

Q: a. Graph a purely competitive market showing the point of equilibrium at a price of $150 and a total…

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Q: What are the advantages of pure competition?

A: Answer: A purely competitive business is the most efficient type of operation. This is due to the…

Q: What kind of business is a water refilling station? What problems are solved with the help of a…

A: 1) A water refilling station is a business where the supplier provides safe, and drinkable water to…

Q: Using the graph from the previous question, explain why a competitive industry is efficient. Be sure…

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Q: When should a firm exit the market in the long run

A: Firm entry and exit refers to the process in which new companies enter a market to sell products or…

Q: If the firms are earning abnormal profit how will the number of firms in industry change?

A: According to the given question In Simple words we can say that the abnormal profits are the profits…

Q: Why don't firms in a competitive market have excess capacity in the long run?

A: When a company produces at a lower production scale than planned, it is said to have excess…

Q: If Wikipedia were provided in a competitive market, and the contributors of Wikipedia were only in…

A: Competition is the battle between producers to increase profits, increase sales, and so on. To look…

Q: e the outcomes if cigarettes enter the perfect competition market?

A: a perfect competition is one in which there are many buyers and sellers and each selling homogenous…

Productive and Allocative Efficiency Analysis

Productive efficiency, also referred to as production efficiency is a term in economics describing the level at which a company is operating at its maximum capacity. Beyond this point, the entity will be unable to manufacture any additional goods without cutting down another product’s production level. This occurrence is an outcome of production happening alongside a Production Possibility Frontier (PPF).