Market Failures in Imperfect Competition Efficiency in exchange is satisfied with the equality between MRS and price ratios of the goods. Efficiency in production is satisfied with the equality between MRTS and the price ratios of factor markets (labor and capital; hence, wage and rent). Efficiency in product mix is normally not satisfied under imperfect competition because MRS is not equal to MRT. Answer the following: a. If there is an imperfect competition in both the goods market (X and Y), say that Px/Py is both under monopoly, is it possible for economic efficiency to be reached? How? Explain in words and mathematically. b. If there is an imperfect competition in both the two factor market (L and K), say that w/r or Pl/Pk is both under monopoly, is it possible for economic efficiency to be attained? How? Explain in words and mathematically.
Market Failures in Imperfect Competition
Efficiency in exchange is satisfied with the equality between MRS and
Answer the following:
a. If there is an imperfect competition in both the goods market (X and Y), say that Px/Py is both under
b. If there is an imperfect competition in both the two factor market (L and K), say that w/r or Pl/Pk is both under monopoly, is it possible for economic efficiency to be attained? How? Explain in words and mathematically.
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