ECO100Y5 Lecture Notes - Lecture 6: Deadweight Loss, Economic Surplus, Natural Monopoly

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2 Sep 2016
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ECO100Y5 Full Course Notes
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Efficiency requires that factors of production are fully employed. If firms don"t use the least-cost method of producing their chosen outputs. If the marginal cost of production is not the same for every firm in an industry. If too much of one product and too little of another products are produced. Productive efficiency for the firm: requires that the firm produce any given level of output at the lowest possible cost. If any profit maximizing firm will seek to be productively efficient no matter the market structure within which it operates 4 types of competition are productively efficient. Productive efficiency for the industry: requires that the industry"s total output be allocated among its individual firms in such a way that the total cost in the industry is minimized. If marginal costs are not equated across firms, then a reallocation of output is necessary in order for the industry to become productively efficient.

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