Answer to Question #271224 in Macroeconomics for Mehwash Sk

Question

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 Fill-in-the-Blank

1. Fill in the blanks to make the following statements correct.

 a. If the marginal cost of producing the last unit of a product is the same for all firms in an industry, we can say that the industry is ________ efficient, but we do not know enough to say that the industry is ________ efficient.

 b. If the marginal cost of some product is $12, and the market price of that product is$15, then to achieve allocative efficiency, the economy should produce ________ of this product and therefore ________ other products.

 c. The market structure that leads to both productive and allocative efficiency is ________.

d. A monopolistic industry may be productively efficient but will not be allocatively efficient because ________.

 

 

Answer 1

(a)

If the marginal cost of producing the last unit of a product is the same for all firms in an industry, we can say that the industry is allocatively efficient, but we do not know enough to say that the industry is productively efficient.

(b)

If the marginal cost of some product is $12, and the market price of that product is $15, then to achieve allocative efficiency, the economy should produce more of this product and therefore less other products.

(c)

The market structure that leads to both productive and allocative efficiency is Perfect competition.

(d)

A monopolistic industry may be productively efficient but will not be allocatively efficient because they do not produce at the quantity where P=MC.