Define productive efficiency. Does productive efficiency imply allocative efficiency? Explain
What will be an ideal response?
Productive efficiency is an efficiency criterion that describes a situation in which goods and services are produced at the lowest possible cost. It does not imply allocative efficiency which is a criterion associated with producing goods and services that consumers value most. For example, a manufacturer may be able to produce typewriters at the lowest possible cost of $200, but this does not necessarily mean that consumers are willing to pay $200 for a typewriter.
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Aggregate producer surplus in an industry is measured along the market supply curve is and only if firm production technologies exhibit the quasilinearity property.
Answer the following statement true (T) or false (F)
As shown in Figure 7-4, an autonomous decline in expectations of future profitability causes the
a. IS schedule to shift to the left. b. IS schedule to shift to the right. c. LM schedule to shift to the right. d. LM schedule to shift to the left.
Suppose that the absolute price elasticity for cookies equals 0.9. We could then say that the demand for cookies is
A) elastic. B) inelastic. C) unit-elastic. D) perfectly elastic.
OPEC is an example of a:
A. duopoly. B. monopoly. C. monopsony. D. cartel.