Answer: Productive efficiency refers to a the situation in which a good or service is produced at the lowest possible cost, in particular, every good or service is produced up to the point where the last unit is produced where the market price is equal to minimum average total cost. Diff: 2 Page Ref: 418/418 Topic: Productive Efficiency Learning Outcome: Micro 19: Explain the concept of efficiency in the economy and obstacles to achieving it AACSB: Reflective Thinking 48
153) Using two graphs, illustrate how a positive technological change in the market for notebook computers could eliminate short - run economic profit for a firm in that market. On the first graph, use a supply and demand graph to illustrate the positive technological change. On the second graph, use demand, ATC , MC and MR curves to illustrate the elimination of economic profit resulting from the positive technological change. Explain what is taking place in each graph. Answer: On the first graph, supply shifts to the right as a result of the positive technological change, lowering the equilibrium price and increasing the equilibrium quantity. On the second graph, the lower price shifts the demand curve down to where it intersects the ATC curve at its minimum point, eliminating economic profit. Diff: 2 Page Ref: 418 - 419/418 - 419 Topic: Productive Efficiency Learning Outcome: Micro 13: Explain the relationship between production and profits under perfect competition AACSB: Reflective Thinking 49
Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.