chap5 - Chapter5:ThePublicSector Economicandtechnical...

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    Chapter 5: The Public Sector
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    Economic and technical  efficiency Technical efficiency – no unemployed or  underemployed resources ( i.e. , operating on  PPC). Economic efficiency (also known as Pareto  optimality) – it is not possible to benefit one or  more individuals without harming someone  else Technical efficiency is a prerequisite for  economic efficiency (but does not guarantee  economic efficiency)
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    Markets and economic efficiency voluntary trade in markets benefits each  trading partner under ideal conditions, markets attain a  state of economic efficiency (Pareto  optimality)
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    Market failure Markets may fail to achieve economic  efficiency as a result of: imperfect information externalities public goods the absence of property rights monopoly, or macroeconomic instability
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    Imperfect information One party may not benefit from a market 
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chap5 - Chapter5:ThePublicSector Economicandtechnical...

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