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Unformatted text preview: An Introduction Slide 76 Markets and Social Welfare Economic efficiency occurs when all goods and services are produced and consumed at their respective socially optimal levels Achieving economic efficiency z Maximizes the economic surplus z Increases the economic pie Chapter 3 - Supply and Demand: An Introduction Slide 77 Markets and Social Welfare When is the market equilibrium efficient? z When all costs of producing the good or service are borne directly by the seller z When all benefits from the good or service accrue directly to buyers Chapter 3 - Supply and Demand: An Introduction Slide 78 Markets and Social Welfare Inefficient market equilibrium z When some costs of production fall on people other than those who sell the good or service z When some benefits from the good or service accrue to people who did not buy the good or service...
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- Spring '08