How do economists define efficiency? Elaborate.
What will be an ideal response?
Economists define efficiency as the absence of waste. An efficient economy wastes none of its available resources and produces the maximum amount of output that its technology permits. In fact, economists assume, unless there is evidence to the contrary, that the economy always operates on its production possibilities frontier rather than below it, since that operation would be inefficient.
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If, when a firm doubles all its inputs, its average cost of production increases, then production displays
A) economies of scale. B) diminishing returns. C) diseconomies of scale. D) declining fixed costs.
Refer to the above diagram. Assume that G and T1 are the relevant curves and that the economy is currently at B, which is its full-employment GDP. This economy has a:
A. cyclically adjusted budget surplus and an actual budget surplus. B. cyclically adjusted budget surplus only. C. cyclically adjusted budget deficit only. D. cyclically adjusted deficit and an actual budget deficit.
Which of the following industries had the highest unionization rate in 2011?
A. Finance B. Construction C. Transportation D. Manufacturing
If the autarkic and world relative prices are equal, then
a. consumers are better off with trade than without trade. b. the country has the option of supplying either good in the world market. c. no gains from trade are possible. d. the world markets are not in equilibrium.