« previous next »

Author Question: Why does an efficient distribution of outputs among households occur in perfectly competitive ... (Read 46 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?

About 80% of major fungal systemic infections are due to Candida albicans. Another form, Candida peritonitis, occurs most often in postoperative patients. A rare disease, Candida meningitis, may follow leukemia, kidney transplant, other immunosuppressed factors, or when suffering from Candida septicemia.

Did you know?

The use of salicylates dates back 2,500 years to Hippocrates’s recommendation of willow bark (from which a salicylate is derived) as an aid to the pains of childbirth. However, overdosage of salicylates can harm body fluids, electrolytes, the CNS, the GI tract, the ears, the lungs, the blood, the liver, and the kidneys and cause coma or death.

Did you know?

Elderly adults are living longer, and causes of death are shifting. At the same time, autopsy rates are at or near their lowest in history.

Did you know?

After 5 years of being diagnosed with rheumatoid arthritis, one every three patients will no longer be able to work.

Did you know?

It is believed that the Incas used anesthesia. Evidence supports the theory that shamans chewed cocoa leaves and drilled holes into the heads of patients (letting evil spirits escape), spitting into the wounds they made. The mixture of cocaine, saliva, and resin numbed the site enough to allow hours of drilling.

Normal Distribution of IQ Scores Normal Distribution of IQ Scores
Effects of competitive inhibition on enzyme kinetics Effects of competitive inhibition on enzyme kinetics
The ability to solve problems may be highly efficient in the older adult The ability to solve problems may be highly efficient in the older adult
IQ scores form what mathematicians call a normal distribution "bell curve" IQ scores form what mathematicians call a normal distribution "bell curve"
Distribution of sex chromosomes from generation to generation. All children receive an X chromosome Distribution of sex chromosomes from generation to generation. All children receive an X chromosome
Distribution of Fluids in a Human Body Distribution of Fluids in a Human Body
Video: Introduction to Sickle Cell Anemia

For a complete list of videos, visit our video library