Author Question: What is productive efficiency? Does it guarantee that markets are operating ... (Read 29 times)

rosent76 · **on:** Jun 30, 2018

What is productive efficiency? Does it guarantee that markets are operating efficiently?

Question 2

Workers in industrial countries earn much higher wages than workers in developing countries because:
a. the industrial countries are labor rich and capital poor economies.
b. the industrial countries lack a steady supply of unskilled laborers.
c. the industrial countries produce labor intensive goods.
d. the marginal productivity of labor is low in the industrial economies.
e. the marginal productivity of labor is high in the industrial economies.

LP · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

Productive efficiency requires that firms in an industry produce goods and services in the least costly way. Productive efficiency alone does not guarantee that markets are operating efficiently. Society must also produce the goods and services that society wants most. This requires that a competitive market achieves allocative efficiency.

Answer to Question 2

e