Production, Cost, and the Perfect Competition Model

Perfect competition.

Utility maximization.

Demand elasticity.

Scarcity.

Economic profit is negative

Economic profit is positive

Implicit costs are lower than explicit costs

Implicit costs are higher than explicit costs

Marginal costs

Opportunity costs

Implicit costs

Explicit costs.

The products are normal goods.

The products are complements.

The products are substitutes.

The products have elastic demand.

It decreases overall utility by reducing the income of lower-income individuals who have higher marginal utility per dollar spent, leading to less efficient allocation of resources.

It has no impact on utility as it only affects income distribution and not individual preferences.

It decreases overall utility by reducing the income of higher-income individuals who have higher marginal utility per dollar spent, leading to less efficient allocation of resources.

It increases overall utility by redistributing income from higher-income individuals who have lower marginal utility per dollar spent, thus achieving greater equity without significant losses in efficiency.

Focusing efforts mainly around just-in-time inventory management strategies to minimize waste.

Investing heavily into automation technologies aimed at increasing productivity levels.

Utilizing night shift operations to capitalize upon otherwise unused hours.

Maximizing output through efficient layout designs thereby reducing unnecessary movement amongst workers.

Every worker receives employment but possibly fewer hours resulting in stable unemployment levels.

Unemployment decreases because workers are more motivated with higher wages.

Unemployment increases as there’s excess supply of labor not met with sufficient demand at this imposed wage rate.

The overall effect on unemployment is neutral since demand for labor will increase proportionally with its cost.

The income they would have earned while working full-time.

Skills developed during either educational pursuits or professional work experience.

Tuition fees and expenses paid for attending college.

Experiences gained through higher education that are not available in the workforce.

It produces more than a perfectly competitive firm due to economies of scale inherent in monopoly markets.

It produces less than the allocatively efficient output level at higher prices due to brand loyalty and product differentiation.

It produces at an equal level but charges different prices because it still faces some competition from other firms’ products.

It yields similar results as perfect competition since free entry eliminates economic profits over time through imitation and innovation among rivals.

Increasing production levels

Decreasing production levels

Maintaining the current production levels

Shutting down operations