Define allocative efficiency. Explain the significance of this concept in economics?
What will be an ideal response?
Allocative efficiency is an efficiency criterion that describes a situation where the marginal benefit (or marginal valuation) of the last unit purchased is equal to the marginal cost of producing that unit. In other words, allocative efficiency occurs when production reflects consumer preferences. This is a significant concept in that all societies face scarcity which necessitates that societies make choices about what goods and services to produce. To maximize society's wealth, resources must flow to their highest valued use. This value is determined by consumers.
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A) 7.1 percent B) 13.3 percent C) 15.4 percent D) 33.3 percent
"Gross Investment spending" refers exclusively to purchases of plant and equipment by businesses and net changes in business inventories
Indicate whether the statement is true or false
The greater the interest rate, the ________ the present value and the ________ the discount factor.
A) larger; smaller B) larger; larger C) smaller; larger D) smaller; smaller
If this game is played once, then
a. Firm A will charge a lower price and firm B will charge a lower price b. Firm A will charge a higher price and firm B will charge a lower price c. Firm A will charge a lower price and firm B will charge a higher price d. Firm A will charge a higher price and firm B will charge a higher price