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ECON 2100 (7)
Chapter 4

Chapter 4- Economic Efficiency and Markets

1 Page
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Department
Economics
Course Code
ECON 2100
Professor
Ross Mc Kitrick

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Chapter 4- Economic Efficiency and Markets October 7, 2013 12:47 PM Definitions Economic Efficiency- occurs when the economy's resources are allocated to their best uses; an equilibrium is reached in which marginal benefits of an activity equal the marginal costs Equity- concern about how a public policy or other economic decision affects people with different levels of income; examining who gets the benefits and who pays the costs Market Failures- market failures occur when there is a divergence between the market value of inputs or outputs and its social value Non-Market Values- the willingness to pay for an item that does not have a well-defined market and, hence, market-determined price Net Social Value- the total willingness to pay for output minus the total costs of producing that good Static Efficiency- economic efficiency at a point in time Dynamic Efficiency- examines the allocation of resources over time (seeing if marginal benefits equal marginal costs at each point in time, over a long time horizon Pareto Optimality- an
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