ECO200Y5 Lecture Notes - Allocative Efficiency, Marginal Cost, Longrun
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Eco100: chapter 8 notes-producers in the long run. Allocative vs. technical efficiency: allocative efficiency means that the marginal cost of each good produced is equal to its _____________________. Technical efficiency means that a given number of inputs are combined in such a way as to maximize the level of output (e. g. costly resources are not under-utilized or wasted) ___________________________ is necessary for a firm to ___________________ profits. The firm wants to get the same _______________________ out of each input, otherwise it could reallocate its spending and produce a higher quantity or produce the same level of output at a lower cost. The principle of substitution: methods of production will change as _____________________ of inputs change. Firms will use relatively _________________ of the cheaper input and relatively ___________ of the more expensive input. Minute paper-take out a sheet of paper, put your first name, last name, and student id number on the sheet of paper and answer the following.
