Explain what economic efficiency is. How does a price system lead to economic efficiency?
What will be an ideal response?
Market failure is a situation in which a market economy either allocates too few or too many resources to a specific economic activity. That is, it is a situation in which a market economy does not achieve economic efficiency. The price system achieves economic efficiency as long as there are not any market failures. But, when there are market failures, an unregulated price system does not achieve economic efficiency, and there is a potential role for government to intervene in some way to bring about an efficient situation.
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If the interest rate is 10 percent per year, and you have $100,000 now, which of the following is closest to what your $100,000 will be worth in four years?
A) $175,000 B) $125,000 C) $146,000 D) $190,000
Holding other factors constant, bad weather causes the supply curve for agricultural products to
a. Shift to the left, causing the prices of agricultural products to rise b. Shift to the left, causing the prices of agricultural products to fall c. Stay the same d. The supply curve does not shift. Only the demand curve shifts.
At the equilibrium level of real gross domestic product (GDP), unplanned inventory adjustment equals _____
Fill in the blank(s) with the appropriate word(s).
Some people go to a new gym because it just happened to open up right next to where they live. People who live farther away do not go to this new gym as much. You compare fitness between these two groups. Using the concept of natural experiment, which of the following statements is true about the scenario?
A. This is a good natural experiment. B. This is a decent natural experiment. C. This is not a natural experiment.