1)In purely competitive markets, productive (or technical) efficiency is achieved:

a) when firms are in equilibrium and produce at the lowest average (or per unit) cost.

b) When firms are in equilibrium and the price is equal to their marginal cost.

c)When firms are in equilibrium and they are earning normal profits.

d)When firms are in equilibrium, there is no entry of firms into (or exit of firms from) the industry.

2)In purely competitive markets, allocative efficiency is achieved when:

a) When firms are in equilibrium, they produce at the lowest average (or per unit) cost.

b) When firms are in equilibrium and P = MC.

c)When all the firms in the industry are earning normal profits.

d)When firms are in equilibrium, there is no entry of firms into (or exit of firms from) the industry.

For the next 4 questions, refer to Graph A.