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21) If a firm in a perfectly competitive industry introduces a lower-cost way of producing an existing product, the firm will be able to earn economic profits in the long run.

22) Firms in perfect competition produce the productively efficient output level in the short run and in the long run.

23) Firms in perfect competition produce the allocatively efficient output in the short run and in the long run.

24) Allocative efficiency is achieved in an industry when firms supply those goods and services that provide consumers with a marginal benefit equal to the marginal cost of producing those goods and services.

25) A perfectly competitive firm in long-run equilibrium produces output at the lowest possible average total cost.

26) What is meant by productive efficiency? How does a perfectly competitive firm achieve productive efficiency?

27) What is meant by allocative efficiency? How does a perfectly competitive firm achieve allocative efficiency?

28) In long-run competitive equilibrium, the perfectly competitive firm produces where price equals minimum average total cost.

a.What is this efficiency criterion called?

b.How does it benefit consumers?

29) Using two graphs, illustrate how a positive technological change in the market for notebook computers could eliminate short-run economic profit for a firm in that market. On the first graph, use a supply and demand graph to illustrate the positive technological change. On the second graph, use demand, ATC, MC and MR curves to illustrate the elimination of economic profit resulting from the positive technological change. Explain what is taking place in each graph.

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