ECON 208 Chapter Notes - Chapter 12: Productive Efficiency, Allocative Efficiency, Marginal Cost

• School: McGill University
• Department: Economics
• Course: ECON 208
• Professor: Alex Hale

Document Summary

Econ 208 chapter 12 economic efficiency and public policy. Productive efficiency for a firm requires costs to be minimized for any given level of output. Productive efficiency for an industry requires the mc to be the same for every firm. If all industries are productively efficient, then the economy is on the production possibilities boundary: any point on the ppb (e. g. b, d, c) is productively efficient. The economy is allocatively efficient when =for every product to know which point is allocatively efficient, we need to think about marginal cost and marginal value in all the separate markets. On the other hand, a single-price are productively efficient. If they interact in competitive markets, the outcome will be allocatively efficient ( = ) (since >) monopolist is productively efficient, but not allocatively efficient. Consumer and producer surplus in a competitive market. Cs (blue) = above market price and below demand. Ps (red) = below market price and above supply.