In a competitive market economy, firms select the least-cost production techniqu
ID: 1115980 • Letter: I
Question
In a competitive market economy, firms select the least-cost production technique because: A. such choices will result in full employment of available resources. B. to do so will maximize the firms' profits. C. this will prevent new firms from entering the industry. D. "dollar voting" by consumers mandates such a choice. 5. According to the concept of the "invisible hand," if Susie opens and operates a profitable childcare then: A. government should regulate the business to ensure quality B. the profit Susie earns indicates that she is overcharging for her services. C. she has served society's interests by providing a desired good or service. D. this demonstrates that consumer sovereignty is not present in this market. 6. An improvement in production technology will: A. increase equilibrium price. B. shift the supply curve to the left. C. shift the supply curve to the right D. shift the demand curve to the left. Supply $1.60 a7.00 .50 Demand 130 200 Quantity 290 7. Refer to the diagram. A surplus of 160 units would be encountered if the price was: A. $1.10, that is, $1.60 minus $.50. B. $1.60. C. $1.00. D. S0.50.Explanation / Answer
4.
In a competitive market economy firms will select the least-cost production technique because to do so will maximize the firms profits. This is because when the least cost production technique is used, then it minimises its cost of production, therefore it maximises the profit.
Hence option B is the correct answer.
5.
According to the concept of the "invisible hand", if Susie opens and operates a profitable childcare center then
she has served society's interest by providing a desired good or service.
The Invisible hand concept means market forces determines the availability of goods and services. The government does not interfere in the market.
This is because a profitable childcare center has been opened in keeping into account, the social welfare along with the intention of the profit.
Hence option C is the correct answer.
6.
An improvement in technology means that the cost of production has decreased, so the firm profit would increase, as a result of the short-run aggregate supply curve shifts rightward.
Hence option C is the correct answer.
7.
As it is visible in the diagram, the surplus will be there if supply is more than demand at any given price. It is very clear from the diagram that, the surplus of 160 units is at price $1.60. This is because at this price the supply is 290 units and demand is 130 units.
Therefore the surplus is (290 -130 = 160) and it is at price $1.60
Hence option B is the correct answer.