« previous next »

Author Question: Why does an efficient distribution of outputs among households occur in perfectly competitive ... (Read 17 times)

newyorker26

  • Hero Member
  • *****
  • Posts: 536
on: Jun 29, 2018
Why does an efficient distribution of outputs among households occur in perfectly competitive markets?
 
  What will be an ideal response?

Question 2

Distinguish between production efficiency and allocative efficiency. Explain why many production possibilities achieve production efficiency but only one achieves allocative efficiency.
 
  What will be an ideal response?
Foundations of Microeconomics ¦ Bade, Parkin ¦ 8th Edition
Buy Test-Bank


Melissahxx

  • Sr. Member
  • ****
  • Posts: 304
Reply #1 on: Jun 29, 2018
Answer to Question 1

Competitive markets ensure that households don't end up with the wrong goods and services. A household will buy a good as its willingness to pay for it is greater than (or equal to) its price. Therefore, as long as households are free to choose how to spend their incomes, they cannot end up with the wrong combinations of goods.

Answer to Question 2

Production efficiency occurs when goods and services are produced at the lowest cost. This definition means that production efficiency occurs at any point on the PPF. Therefore all of the production points on the PPF are production efficient. Allocative efficiency occurs when goods and services are produced at the lowest cost and in the quantities that provide the greatest possible benefit. The allocatively efficient production point is the single point on the PPF that has the greatest possible benefit.


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
« previous next »
 

Did you know?

Atropine, along with scopolamine and hyoscyamine, is found in the Datura stramonium plant, which gives hallucinogenic effects and is also known as locoweed.

Did you know?

The average older adult in the United States takes five prescription drugs per day. Half of these drugs contain a sedative. Alcohol should therefore be avoided by most senior citizens because of the dangerous interactions between alcohol and sedatives.

Did you know?

Blastomycosis is often misdiagnosed, resulting in tragic outcomes. It is caused by a fungus living in moist soil, in wooded areas of the United States and Canada. If inhaled, the fungus can cause mild breathing problems that may worsen and cause serious illness and even death.

Did you know?

Amoebae are the simplest type of protozoans, and are characterized by a feeding and dividing trophozoite stage that moves by temporary extensions called pseudopodia or false feet.

Did you know?

There can actually be a 25-hour time difference between certain locations in the world. The International Date Line passes between the islands of Samoa and American Samoa. It is not a straight line, but "zig-zags" around various island chains. Therefore, Samoa and nearby islands have one date, while American Samoa and nearby islands are one day behind. Daylight saving time is used in some islands, but not in others—further shifting the hours out of sync with natural time.

Where Earthquakes Occur— Convergent Boundaries Where Earthquakes Occur— Convergent Boundaries
Distribution of Rods and Cones on the Retina Distribution of Rods and Cones on the Retina
Distribution and Forms of Precipitation: Snow Distribution and Forms of Precipitation: Snow
Distribution and Forms of Precipitation: Freezing Rain Distribution and Forms of Precipitation: Freezing Rain
Blood Distribution Blood Distribution
Trimodal distribution of trauma deaths Trimodal distribution of trauma deaths
Video: Types of energy transfer reactions: oxidation-reduction reactions and ATP generation reactions

For a complete list of videos, visit our video library