What Two Conditions Must Hold For A Competitive Market To Produce Efficient Outcomes?

What two conditions must hold for a competitive market to produce efficient outcomes? Supply curves must reflect all costs of production, and demand curves must reflect consumers’ full willingness to pay.

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What conditions must exist for allocative efficiency to occur?

What conditions must exist for allocative efficiency to occur? Marginal benefit must equal marginal cost; The maximum willingness to pay must equal the minimum acceptable price.

Why does the market system fail to produce public goods group of answer choices?

The market system does not produce public goods because: 1. there is no need or demand for such goods. private firms cannot stop consumers who are unwilling to pay for such goods from benefiting from them.

When a competitive market maximizes economic surplus it implies that the?

When a competitive market maximizes economic surplus, it implies that the. marginal benefit of having the product is greater than the marginal cost. buyers are getting the maximum consumer surplus from the product.

Which factor could contribute to a firm experiencing economies of scale?

Which factor could contribute to a firm experiencing economies of scale? diminishing marginal returns.

Why does the long run average cost curve look like u?

Long Run Cost Curves The long-run cost curves are u shaped for different reasons. It is due to economies of scale and diseconomies of scale. If a firm has high fixed costs, increasing output will lead to lower average costs. However, after a certain output, a firm may experience diseconomies of scale.

What are the different types of economies of scale?

As mentioned above, there are two different types of economies of scale. Internal economies are borne from within the company. External ones are based on external factors. Internal economies of scale happen when a company cuts costs internally, so they’re unique to that particular firm.

What are the different types of internal economies of scale?

There are six types of internal economies of scale: technical, managerial, marketing, financial, commercial, and network economies of scale. Technical economies of scale are achieved through improvements and optimizations within the production process.

What is the difference between internal and external economies of scale?

Internal economies of scale are firm-specific—or caused internally—while external economies of scale occur based on larger changes outside the firm. Both result in declining marginal costs of production, yet the net effect is the same.

What is difference between internal and external?

Internal communication occurs when the members of an organization exchange information with each other. External communication takes place when those members interact and communicate with an outside party. Effective internal and external communication are both crucial to the success of a business.

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What are internal and external costs?

Internal costs are easy to see and explain. They are costs that a business bases its price on. They include costs like materials, energy, labour, plant, equipment and overheads. External costs are costs that are NOT included in what the business bases its price on.

What is an example of an external failure cost?

External failure costs when the defect is discovered after it has reached the customer. This is the most expensive category of quality costs. Examples include product returns, repairs, warranty claims, lost reputation, and lost business.

What is an example of an external cost?

External costs (also known as externalities) refer to the economic concept of uncompensated social or environmental effects. For example, when people buy fuel for a car, they pay for the production of that fuel (an internal cost), but not for the costs of burning that fuel, such as air pollution.

What is an example of an external benefit?

External benefit – definition External benefits can arise from both production and consumption. Many, if not most transactions create external benefits – examples include: Taking a bus reduces congestion on a road, enabling other road users to travel more quickly.

Why do external benefits lead to market failure?

An externality stems from the production or consumption of a good or service, resulting in a cost or benefit to an unrelated third party. Externalities lead to market failure because a product or service’s price equilibrium does not accurately reflect the true costs and benefits of that product or service.

When an external benefit is present?

Definition – An external benefit occurs when producing or consuming a good causes a benefit to a third party. The existence of external benefits (positive externalities) means that social benefit will be greater than private benefit.

When an external cost is present?

When external cost or external benefit is present, the market price for the activity that generates external cost or external benefit is too low to be efficient. When these externalities are internalized, price will go up in both cases. But the quantity demanded will go down when external cost is internalized.

When an external benefit is present quizlet?

When external benefits are present in a market, less of the good will be produced than the amount consistent with economic efficiency. because some of the costs and benefits of producing a good are not reflected in the market price. too few resources devoted to its production.

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What are the external benefits of education?

These include lower government health, welfare, and prison costs; strengthened democracy, human rights, political stability, and social capital; less crime and poverty; environmental benefits; better international competitiveness; new ideas and diffusion of technology.

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