02 allocative efficiency
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This document discusses different types of economic efficiency including allocative efficiency, productive efficiency, and dynamic efficiency. It examines these efficiencies in the context of perfect competition, monopoly, and monopolistic competition market structures. Productive efficiency refers to producing at lowest cost while dynamic efficiency involves reinvesting supernormal profits into lowering costs further. The document considers which market structure results in each type of efficiency.
02 allocative efficiency
- 1. Using economic vocabulary, describe the cost structures of these two different firms: A. Prices to consumers? B. Positive for society? C. Negatives? D. Food stamp effect?
- 2. Types of economic efficiency
- 3. Efficiency vocabulary • Allocative efficiency • MB > MC what should we do? • MB < MC what should we do? • MB = MC best situation, using our allocations “best” • Perfect Competition
- 4. Efficiency vocabulary • Allocative efficiency • Monopoly • Monopolistic Comp • NO
- 5. Efficiency vocabulary • Productive efficiency • Lowest cost production • Min of ATC
- 6. Efficiency vocabulary • Dynamic efficiency • SUPER Normal Profit • Reinvest into lower costs
- 7. • Productive Eff. • Productive Eff. • Dynamic Eff. X Y Z C
- 8. • Productive Eff. • Productive Eff. • Dynamic Eff. B CD
- 9. Which prices would result in: Productive Eff. Productive Eff. Dynamic Eff.
- 13. PAGES 410-411 • 3 quick debates • How should we define this issue? • Efficiency? Production? Cost? • Is monopoly efficient? • Is monopoly fair? • Is rent seeking justified?