ECO100Y5 Chapter Notes - Chapter 12: Monopolistic Competition, Productive Efficiency, Allocative Efficiency

• School: UTM
• Department: Economics
• Course: ECO100Y5
• Professor: Michael H O

Document Summary

Price = mc: many small firms, differentiated products. Each firm has some power to set price. Here are three examples of inefficiency in the use of fully employed resources. 2. if firms don"t use the least cost method, they are being inefficient. Example: producing something at a certain price when you could"ve produced it at a lower price. if marginal costs of production are not the same for every firm in an industry, the industry is being inefficient. Example: having to produce something at a higher price than other firms: having too much or too little of one product. It requires that the marginal cost be the same for each firm. Productive efficiency and the production possibilities boundary (ppb) if firms are productively efficient, they are minimizing their costs; there is no way for them to increase output without using more resources.