Consider an industry or a firm or product that has disappeared from the market as a result of allocative efficiency and creative destruction and replaced by another industry or a firm or product. Discuss the pros and cons of this process for your choice of industry or a firm or product

Consider an industry or a firm or product that has disappeared from the market as a result of allocative efficiency and creative destruction and replaced by another industry or a firm or product. Discuss the pros and cons of this process for your choice of industry or a firm or product

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter14: Transaction Costs, Asymmetric Information, And Behavioral Economics

Section: Chapter Questions

Problem 1.3P

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Concept explainers

Productive and Allocative Efficiency Analysis

Productive efficiency, also referred to as production efficiency is a term in economics describing the level at which a company is operating at its maximum capacity. Beyond this point, the entity will be unable to manufacture any additional goods without cutting down another product’s production level. This occurrence is an outcome of production happening alongside a Production Possibility Frontier (PPF).

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Definition Definition State in which the marginal benefit to a consumer is equal to the marginal cost of producing a product. Allocative efficiency occurs when all the market participants (buyers and sellers) have all of the knowledge required to make informed decisions regarding consumption and production of goods and services.

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