H07EfficiencyRules - 1 allocative efficiency production...

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Unformatted text preview: 1 allocative efficiency production matches tastes distributive efficiency no improvement with redistribution productive efficiency cannot produce at lower cost--- MC = for all sellers--- MB = for all buyers--- MB = MC Efficiency Efficiency 25 Quantity Marginal Cost 1 3 2 4 3 7 4 1 2 Rocks Marginal Cost 1 2 4 8 Slates Quantity Marginal Benefit 1 6 2 4 3 3 4 2 Barneys Marginal Benefit 9 7 4 2 Freds Consider p=$4 Pareto efficient cannot make someone better off without making someone else worse off at the same time Conditions PS CS Competitive Equilibrium Competitive Equilibrium 2 4 6 8 10 1 2 3 4 5 6 7 8 Quantity Price (Per Unit) D 2 4 6 8 10 1 2 3 4 5 6 7 8 Quantity Price (Per Unit) D S Market Price (=4) allocative efficiency --- MB = MC production matches tastes distributive efficiency --- MB = for all buyers no improvement with redistribution productive efficiency --- MC = for all sellers cannot produce at lower cost Pareto efficient cannot make someone better off without making someone else worse off at the same time Conditions 25 PS CS Competitive Equilibrium Competitive Equilibrium 2 4 6 8 10 1 2 3 4 5 6 7 8 Quantity Price (Per Unit) D 2 4 6 8 10 1 2 3 4 5 6 7 8 Quantity Price (Per Unit) D S Market Price (=4) Pareto efficient cannot make someone better off without...
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This note was uploaded on 01/24/2012 for the course ECON 101 taught by Professor Gerson during the Fall '08 term at University of Michigan.

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H07EfficiencyRules - 1 allocative efficiency production...

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