Question

'Economic efficiency is market outcome in which the marginal benefit to consumers of the last unit produced is greater than its marginal cost of production and in which the sum of consumer surplus and producer surplus is at maximum: market outcome in which the margina benefit to consumers of the last unit produced equal to its margina cost of production and in which the sum of consumer surplus and producer surplus is at maximun market outcome in which the marginal benefit to consumers of the last unit produced is equa to its margina cost of production and in which the sum of consumer surplus and producer surplus is not at maximum government outcome in which the marginal benefit to consumers of the last unit produced is equal to its margina cost of production and in which the sum of consumer surplus and producer surplus is at maximum.'

          'Economic efficiency is
market outcome in which the marginal benefit to consumers of the last unit produced is greater than its marginal cost of production and in which the sum of consumer surplus and producer surplus is at maximum: market outcome in which the margina benefit to consumers of the last unit produced equal to its margina cost of production and in which the sum of consumer surplus and producer surplus is at maximun market outcome in which the marginal benefit to consumers of the last unit produced is equa to its margina cost of production and in which the sum of consumer surplus and producer surplus is not at maximum government outcome in which the marginal benefit to consumers of the last unit produced is equal to its margina cost of production and in which the sum of consumer surplus and producer surplus is at maximum.'

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Added by Ryan L.

Principles of Economics

Gregory Mankiw 8th Edition

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Solved by Expert Jonathan Tapiwa

01/12/2022

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'Economic efficiency is market outcome in which the marginal benefit to consumers of the last unit produced is greater than its marginal cost of production and in which the sum of consumer surplus and producer surplus is at maximum: market outcome in which the margina benefit to consumers of the last unit produced equal to its margina cost of production and in which the sum of consumer surplus and producer surplus is at maximun market outcome in which the marginal benefit to consumers of the last unit produced is equa to its margina cost of production and in which the sum of consumer surplus and producer surplus is not at maximum government outcome in which the marginal benefit to consumers of the last unit produced is equal to its margina cost of production and in which the sum of consumer surplus and producer surplus is at maximum.'

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Transcript

00:01 Okay, the analysis we have in this question revolves around trying to define what economic efficiency is.

00:09 So we are given four definitions of which we need to pick one, correct one out of the four.

00:18 So the starting point is just understanding that economic efficiency is basically a level where you cannot increase the benefit.

00:31 Of one person without disadvantaging another.

00:37 So every scarce resource in an economy is used and distributed among producers and consumers in a way that produces the most allocatively efficient situation in the economy.

00:55 Okay, so basically by that simple illustration, okay this this equilibrium basically represents the allocative efficiency okay allocative efficiency because it is efficiency because it's basically where your marginal benefit in this case marginal utility is the same thing marginal utility is equal to the marginal cost that's allocative efficiency if it's going to be a quantity that is produced at this level, that is not going to be representative of efficiency.

01:39 Why? because at this level, the marginal utility would be greater than the marginal cost.

01:49 So you could still increase production.

01:52 Okay, let me just call it q1a.

01:54 You could still increase production and be, if increase economic, efficiency.

02:02 So up to this point, you cannot therefore, from this point, increase economic efficiency because you have reached an equilibrium where marginal utility equals marginal cost.

02:18 But let's look at a summary of these scenarios that are given.

02:24 I'm going to just put aside as a quick display here...

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