Chapter 5 - Micro Chapter 5 Difficult Cases for the Market,...

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Unformatted text preview: Micro Chapter 5 Difficult Cases for the Market, and the Role of Government 3 Learning Goals 1) Explore the details of efficiency 2) Identify factors that reduce the efficiency of markets 3) Explain how those factors reduce efficiency A Closer Look at Economic Efficiency What does efficiency mean? The largest net benefit is achieved Rule: Engage in an activity so long as the expected marginal benefit is greater than the expected marginal cost Graph: Have you ever said to yourself thats good enough? When cleaning something When studying for an exam When completing a task Perfection is not usually a desirable result Potential Shortcomings of the Market Markets will usually generate an efficient outcome. Sometimes they may not. Four reasons why the market may produce an inefficient outcome: (1) A lack of competition (2) Poor information (3) Public goods (4) Externalities (1) A lack of competition If there are only a few firms, then supply may be restricted which will lower the quantity...
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This note was uploaded on 04/02/2012 for the course ECO 2023 taught by Professor Joecalhoun during the Spring '12 term at Florida State College.

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Chapter 5 - Micro Chapter 5 Difficult Cases for the Market,...

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