ECON 101 Study Guide - Midterm Guide: Transaction Cost, Cost, Social Cost
Document Summary
Productive efficiency: maximizing level of production given resources. Allocative efficiency: right mix of g/s produced to match society"s desires (supply & demand) Private cost: paid by producers of g/s. Social cost: cost paid by society to produce the g/s. Social benefit: total benefit to society from consuming the g/s. Negative: oil spill, sidewalk clutter, cigarette smoke. Whoever is causing externality will be affected. As level of production , avg cost of producing each unit declines* Gains from trade by dividing tasks, specializing, and then trading. Trade makes everyone better, some trade deals better than others. As long as agents have diff opportunity costs, everyone has a comparative advantage/disadvantage in something. Autarky: econ environment that prevents trade with other countries. P w >p dom export (suppliers sell the good at a higher price) P w