Lecture 10 - Introduction to Introduction Economics...

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© Gustavo Indart Slide 1 ECO 100Y ECO 100Y Introduction to Introduction to Economics Economics Lecture 10: Lecture 10: Efficiency and Efficiency and Government Intervention Government Intervention
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© Gustavo Indart Slide 2 Productive and Allocative Productive and Allocative Efficiency Efficiency ± Efficiency implies both productive efficiency and allocative efficiency ± Productive efficiency requires that all resources are used productively to maximize output ¾ That is, it requires resources not be wasted ± Allocative efficiency requires that the proper output- mix be produced ¾ That is, it requires a proper allocation of resources among different industries
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© Gustavo Indart Slide 3 Productive Efficiency Productive Efficiency ± Productive efficiency has two aspects: ¾ production within each firm ¾ allocation of production among firms in an industry ± Productive efficiency for the firm requires that the firm produces any level of output at the lowest possible cost ¾ In the long-run, this implies that the firm must choose the least costly combination of the factors of production ± Productive efficiency for the industry requires that marginal cost be the same for all firms ¾ This implies that each additional unit of output must be supplied by the firm with the lowest marginal cost
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© Gustavo Indart Slide 4 Productive Efficiency for
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Lecture 10 - Introduction to Introduction Economics...

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