« previous next »

Author Question: Why does an efficient distribution of outputs among households occur in perfectly competitive ... (Read 18 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?

Stroke kills people from all ethnic backgrounds, but the people at highest risk for fatal strokes are: black men, black women, Asian men, white men, and white women.

Did you know?

Approximately 70% of expectant mothers report experiencing some symptoms of morning sickness during the first trimester of pregnancy.

Did you know?

More than 34,000 trademarked medication names and more than 10,000 generic medication names are in use in the United States.

Did you know?

Adult head lice are gray, about ? inch long, and often have a tiny dot on their backs. A female can lay between 50 and 150 eggs within the several weeks that she is alive. They feed on human blood.

Did you know?

Patients who have undergone chemotherapy for the treatment of cancer often complain of a lack of mental focus; memory loss; and a general diminution in abilities such as multitasking, attention span, and general mental agility.

Rates of Childhood Overweight and Obesity Worldwide The highest rates occur in the most affluent re Rates of Childhood Overweight and Obesity Worldwide The highest rates occur in the most affluent re
The exhaust gas recirculation system is more efficient at controlling NOx emissions if the exhaust ... The exhaust gas recirculation system is more efficient at controlling NOx emissions if the exhaust ...
Distribution and Forms of Precipitation: Snow Distribution and Forms of Precipitation: Snow
Employment Status of Food-Insecure Households Employment Status of Food-Insecure Households
How the Distribution of Education Affects the Distribution of Income How the Distribution of Education Affects the Distribution of Income
Vascular Distribution and Control of Circulation Vascular Distribution and Control of Circulation
Video: Power Supply Polyacrylamide Gel Protein Sample

For a complete list of videos, visit our video library