Econ 208 Chapter 12: economic efficiency and public policy || QUESTIONS WITH CORRECT ANSWERS!!
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Course
Econ 208
Institution
Econ 208
examples of inefficiency when still fully employing all resources correct answers -if firms do not use the least cost method of production
-if the marginal cost of production is not the same for every firm in an industry
-if too much of one product and too little of another product are produced
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Econ 208 Chapter 12: economic efficiency and public
policy || QUESTIONS WITH CORRECT ANSWERS!!
examples of inefficiency when still fully employing all resources correct answers -if firms do
not use the least cost method of production
-if the marginal cost of production is not the same for every firm in an industry
-if too much of one product and too little of another product are produced
productive efficiency for the firm correct answers -when the firm chooses among all available
production methods to produce a given level of output at the lowest possible cost
-requires the firm to be producing its output at the lowest possible cost
-if firms are productively efficient, they are minimizing their costs and there is no way for
them to increase output without using more resources
productive efficiency for the industry correct answers -when the industry is producing a given
level of output at the lowest possible cost
-requires marginal cost to be equal across all firms in the industry
-if an industry is productively efficient, it as a whole is producing its output at the lowest
possible cost and there is no way for them to increase output without using more resources
productive efficiency and the production possibility boundary correct answers -if firms and
industries are productively efficient, the economy with be on rather than inside the PPB
allocative efficiency correct answers -the economy is allocatively efficient when, for each
good produced its marginal cost of production is equal to its price
-allocative efficiency will be achieved when the marginal cost of producing the good equals
the marginal value of consuming that good
allocative efficiency and the PPB correct answers -allocation of resources in the economy
changes as we move along the PPB
-is one point that is allocative efficiency and higher up or lower down on the curve is
inefficient
perfect competition and efficiency correct answers -perfectly competitive industries are
productively efficient
-if an economy were made up entirely of perfectly competitive industries the economy would
be allocatively efficient
monopoly and efficiency correct answers -monopoly is not allocatively efficient because the
monopolist's price always exceeds its marginal cost
consumer surplus correct answers -difference between the value that customers place on a
product and the payment that they actually make to buy the product
producer surplus correct answers -difference between the actual price that the producer
receives for a product and the lowest price that the producer would be willing to accept for
the sale of that product
-for each unit sold, producer surplus is the difference between price and marginal cost
-to accept any amount less than the marginal cost would REDUCE the firms profits
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