Allocative inefficiency means: a. goods aren't going to the consumers who value them the most. b....
Question:
Allocative inefficiency means:
a. goods aren't going to the consumers who value them the most.
b. goods aren't being allocated at low cost.
c. firms aren't producing all goods that consumers value more than the cost of production.
d. firms could produce at lower costs than they are producing at if they reallocated their resources.
e. resources aren't being used by the firms that value them the most.
Consumer:
A person who is at the end of a product cycle who actually uses the product or buys a product for the use by family can be called as a consumer. Consumer has a lot of power in determining the acceptance of a product by seller.
Answer and Explanation: 1
Become a Study.com member to unlock this answer! Create your account
View this answerThe correct answer is: a) goods aren't going to the consumers who value them the most.
Allocative inefficiency is characterized by a situation when...
See full answer below.
Ask a question
Our experts can answer your tough homework and study questions.
Ask a question Ask a questionSearch Answers
Learn more about this topic:
Get access to this video and our entire Q&A library
Allocative Efficiency in Economics: Definition & Example
from
Chapter 3 / Lesson 20
20K
Understand what allocative efficiency is and when it occurs. Learn the definition and formula for allocative efficiency, and see examples of allocative efficiency.
Related to this Question
- When society overallocated resources to the production of a product it means that the ________. (a) investment in the product is declining (b) opportunity cost of the product is decreasing (c) marginal benefit is greater than the marginal cost (d) margina
- Allocative efficiency: a. means that no inferior products will be produced. b. implies that the economy's output is distributed evenly. c. means that those who work hardest will get more. d. implies that resources are used to produce the goods and service
- An economy produces consumer goods and capital goods. Initially, 600 units of consumer goods can be produced if no capital goods are produced. Likewise, 600 units of capital goods can be produced if no consumer goods are produced. A. In a graph, show an i
- When an increase in the range of goods produced brings a decrease in the average total cost of production, the firm is experiencing A. diminishing returns. B. economies of scale. C. economies of scope. D. diseconomies of scale.
- If an economy is being "productively efficient," then that means the economy is A. producing the products most wanted by society. B. fully employing all economic resources. C. maximizing the returns to factors of production. D. using the least costly prod
- If a market is being "productively efficient," then that means the market is: a. Producing the products most wanted by society, b. Fully employing all economic resources, c. Maximizing the returns to factors of production, d. Using the least costly produc
- In a Production Possibilities Curve depicting the trade-off between with capital goods vs. consumer goods, an economy choosing more capital goods and less consumption goods will, ceteris paribus: a. Be inefficient b. Grow slower c. Grow faster d. Not have
- X-inefficiency refers to the situation in which A. firms that use labor-intensive production methods tend to be less efficient than firms that use capital-intensive production methods. B. firms with market power have less incentive to minimize their costs
- The term productive efficiency refers to: A) any short-run equilibrium position of a competitive firm. B) the production of the product mix most desired by consumers. C) the production of a good at the lowest average total cost. D) fulfilling the cond
- Suppose that capital costs $10 per unit and labour costs $4 per unit. If the marginal product of capital is 50 and the marginal product of labour is 50, then in the long run the firm should in order to minimize its costs of producing its output. A) emplo
- Demonstrate that the marginal production cost is equal to the average production cost for the value of the output that minimizes the average production cost.
- Free market is efficient based on 3 insights: (1) The goods are consumed by the buyers who value them most highly. (2) The goods are produced by the producers with the lowest costs. (3) Raising or low
- The opportunity cost of producing capital is _______. (a) decreased current production of consumption goods (b) increased future production of consumption goods (c) the amount of roundabout production (d) abundant capital accumulation (e) the decreased am
- Because of diminishing returns, a factor of production in scarce supply has a: a. low marginal product and a low rental price. b. low marginal product and a high rental price. c. high marginal product and a high rental price. d. high marginal product and
- A firm is producing 50 units of output and receiving $1.50 for each unit. At this output, marginal revenue is $l.25, average cost per unit is $l.20, and marginal cost is $l.40. From these revenue and
- A person who has an absolute advantage in the production of all goods will: a) produce all goods at the lowest opportunity cost. b) also have a comparative advantage in the production of all goods. c) not be able to gain from specialization and trade. d)
- One interpretation of producer surplus is that it equals: a. The profits of a firm, b. Consumer surplus, c. The return to the fixed factors of production in an industry, d. The difference between the price of a product and its average cost of producti
- Diminishing returns to capital implies that what diminishes as more capital is added? a. output b. the marginal product of capital c. the cost of producing goods and services d. technological knowledg
- If an economy produces its most wanted goods but uses outdated production methods, it is: a. not achieving productive efficiency. b. achieving productive efficiency, but not allocative efficiency. c. achieving both productive and allocative efficien
- If property rights for a product are poorly defined or enforced, then: a. underconsumption will occur, and producers will be unsatisfied with the lack of profitability. b. overconsumption will occur, and few firms will find it beneficial to produce the pr
- 1) Production Functions and Marginal Products: How do inputs turn into outputs? 2) Iso-quants/-costs and cost-minimization: What?s the best way to produce a given level of output? 3) Cost Curves and
- An imperfectly competitive firm attempts to minimize the cost of producing a specific level of output Q^0. Quantity is produced according to the production function: Q=KL. a. Show graphically the amount of capital and labor that ill minimize the costs of
- Attaining "allocative efficiency" means that: a. The law of increasing opportunity costs has reached a maximum, b. The least costly methods are being used to produce a product, c. Resources are being devoted to the production of products most desired by s
- Attaining "allocative efficiency" means that A. the law of increasing opportunity costs has reached a maximum. B. the least costly methods are being used to produce a product. C. resources are being devoted to the production of products most desired by so
- An imperfectly competitive firm attempts to minimize the costs of producing a specific level of output (Q^0). Quantity is produced according to the production function: Q=KL. a. Show graphically the amount of capital and labor that will minimize the cost
- In a market economy, will units of a good be produced and purchased if consumers value them more than their cost of production? Explain. If the production cost per unit of a good exceeds the value der
- In the short run, when a firm is producing quantities that are greater than the quantity which minimizes short-run average costs, the marginal product of labor (MPL) A. will be rising the more the firm is producing. B. will be falling the more the firm is
- When the quantity of capital in an economy increases?, Blank. A. the opportunity cost of most goods falls to zero. B. economic growth occurs, but it is not free. C. the opportunity cost of producing every good decreases. D. the production possibilities fr
- While specialization allows firms to produce many goods and services at lower production and transaction costs than individuals can, most households still produce some goods and services for themselve
- Goods and services are scarce because: a. people are greedy b. they are produced using scarce resources c. firms keep production low in order to earn higher profits d. they are produced by firms that
- Consider an economy that produces consumer goods and capital goods. Suppose the economy is operating at full-employment and all capital goods are subject to legal price ceilings set below equilibrium
- In the short run, an unexpected increase in prices will - reduce resource prices and increase the quantity of goods supplied. - decrease the productive capacity of firms and decrease the quantity of goods supplied. - increase the profits of firms, ther
- "When the cost of producing a unit of a good falls because the firm uses specialized resources to produce a range of goods and services" is the definition of A. economic efficiency. B. economies of scale. C. technological efficiency. D. economies of scope
- Is there an opportunity cost to increased investment in capital goods today? a. Yes, increased production of capital goods means fewer consumer goods today. b. Yes, increased production of capital goods today means less economic growth in the future. c. N
- Total variable cost is the sum of all A. implicit costs. B. costs of the firm's fixed inputs. C. costs that rise as output increases. D. costs associated with the production of goods.
- As the quantity produced by a firm increases, marginal cost eventually starts increasing because: A. of diminishing, or decreasing, marginal product of labor. B. in the short run, the firm cannot add workers. C. each additional unit is cheaper to produc
- In the expenditure approach, GDP investment includes inventories defined to be A) return goods by consumers B) goods produced but not sold by producers C) unwanted goods by producers D) services
- The production function for a firm is given by q = L^{.75} K^{.25} where q denotes output; Land K labor and capital inputs. (a) Determine marginal product of labor. Show whether or not the above production function exhibits diminishing marginal produ
- While specialization allows firms to produce many goods and services at lower production and transaction costs than individuals can, most households still produce some goods and serves for themselves.
- In the short run, this monopolistically competitive firm will set the price at: a) $52 and p roduce 50 units of output, b) $55 and produce 45 units of output, c) $50 and produce 35 units of output, d) $65 and produce 35 units of output.
- Marginal cost is A. all the costs of production of goods. B. all the costs of the fixed inputs. C. the change in the total cost resulting from a one-unit change in output. D. all the costs that vary with output.
- Economic profit equals total revenue minus: a) the cost of resources bought in the market. b) the implicit rental rate. c) the cost of resources owned by the firm. d) the cost of resources supplied by the owner. e) the opportunity cost of production.
- Production is inefficient A. only when an economy is producing inside its production possibility frontier (PPF). B. only when an economy is producing at the origin (0,0) on the PPF. C. Production is never inefficient. D. only when the economy is producing
- Technology advances can also reduce waste and defective products thus effectively increasing output per unit of input. As a result, the average marginal cost tends to _________.
- Given that the production function relating output to capital becomes flatter moving from the left to the right means that: A) The marginal product of capital is positive. B) There is diminishing marginal productivity of labor. C) There is diminishing mar
- Your firm must produce a specified output level. The firm uses capital and labor as inputs. If the price of capital is $40, the price of labor is $100, the marginal product of capital is 20, and the marginal product of labor is 40, then: - the firm is mi
- a. If the input price decreases from $2.00 to $1.50, what is the new per unit cost of production? b. Suppose that instead of the input price decreasing, the productivity had increased by 25%. What will be the new unit cost of production?
- A firm has the following production function f(K,L)=K^{1/2}L^{2/3}, where K is capital and L is labor. It will produce 80 units of output and faces prices for labor and capital as follows: w_K =15, w_L+ 10. Find the cost minimizing bundle of labor and cap
- A person who has an absolute advantage in the production of all goods will: a) not have a comparative advantage in the production of any goods. b) produce all goods at the lowest opportunity cost. c) have a comparative advantage in the production of only
- Economic profit is the difference between total revenue and A. opportunity costs of production. B. explicit costs of production. C. interest costs of production. D. implicit costs of production.
- Production is inefficient: a. Only when an economy is producing inside its production possibility frontier (PPF), b. Only when an economy is producing at the origin (0.0) on the PPF, c. Production Is never inefficient, d. Only when the economy is produ
- 1. An overallocation of resources in an industry means that for the last unit produced, a. the marginal cost of production is falling. b. society places a higher value on the resources required to pro
- A company has the following cost function: C(q) = 4q3 - 200q2 + 500q + 50,000. a. What level of output will minimize the average variable cost? b. Does the production process indicate diminishing marginal product? How can you tell?
- "When the cost of producing a unit of a good falls as its output rate increases" is the definition of A. economic efficiency. B. economies of scale. C. economies of scope. D. technological efficiency
- The firms given below are evolved in the production of consumer goods. |Stage of production|Sales value of the product |Firm A|1,650 |Firm B|2,110 |Firm C|3,570 |Firm D|4,630 |Firm E|6,350 a. What is the total value added by all the firms in the productio
- A cap-and-trade policy is most often used to solve problems associated with: a. the production of goods that generate a negative externality. b. the production of goods that generate a positive externality. c. the production of public goods. d. the prod
- Hiring a unit of labour costs $10 while hiring a unit of capital costs $20. The marginal product of capital is equal to 200. A cost-minimizing manager will hire labour until its marginal product falls to: a) 50 b) 100 c) 200 d) 400
- The marginal physical product of labor declines as long as there is any opportunity cost associated with the production of the good.
- Potential GDP is the value of real GDP when all the economy's factors of production, and, are fully. a. wages; rent; interest; profits; optimized b. average costs; marginal costs; variable costs; fixed costs: minimized c. labor; capital; land; entrepreneu
- When the efficient quantity of output is produced? (a) The sum of consumer surplus and producer surplus is maximized (b) The marginal benefit of the last unit produced is equal to the marginal cost to theist unit produced (c) Resources are used in the act
- Output is produced according to Q=4LK, where L is the quantity of labor input and K is the quantity of capital input. If the price of K is $10 and the price of L is $5,then the cost minimizing combina
- Economic profit equals total revenue minus? A) the cost of resources bought in the market. B) the implicit rental rate. C) the opportunity cost of production. D) the cost of resources supplied by the owner. E) the cost of resources owned by the firm.
- What are some ways to minimize production costs? Note that the term "production" refers to the process of turning input into output and applies to the production of goods and services, not only factory production.
- The production function of a firm is y = min {2l, k} where y, l and k rest denote output, labor, and capital. The firm has to produce 10 units of output and the wage rate is 2 and the price of capital
- If the marginal product per dollar spent on capital is more than the marginal product per dollar spent on labor, then to minimize costs, the firm should use? a) less capital and more labor. b) less labor and more capital. c) less labor and less capital. d
- It is clear that productive inefficiency is a waste since resources are used in a way that produces less goods and services than a nation is capable of. Why is allocative inefficiency also wasteful?
- In moving production allocations from points B to D on the Production Possibilities Frontier, the opportunity cost of production at Point C is {Blank} unit(s) of {Blank} goods. A. 15; capital B. 15; consumption C. 12.5; capital D. 12.5; consumption
- Short-run average costs eventually rise because of a. rising factor prices. b. reduced incentives to work in large plants. c. falling marginal and average productivity. d. rising overhead costs.
- What is the cost-minimizing level of capital that the firm must use to produce a target level of output, Q = 1600? A firm's production process uses labor, L, and capital, K, and materials, M, to produce an output, Q according to the function Q= KLM, where
- The law of diminishing marginal productivity states: a. that in the presence of a fixed factor, at some point average product of labor starts to fall as more and more variable inputs are added. b. that average total costs of production initially fall and
- The rate of product transformation refers to: a. How a consumer can trade one good for another while still maximizing his or her utility, b. How a firm can substitute one input for another and still maintain the same production level, c. How production of
- If firms are experiencing unplanned reductions in their inventories: a. firms should reduce their production. b. aggregate output exceeds aggregate expenditures. c. firms will increase output and hire more workers. d. the economy has attained equilibrium.
- The slope of the per person production function [Y/N = Af(K/N)] is A) the marginal product of labor. B) the marginal product of capital. C) lower for a poor country than for a rich country. D) higher for a rich country than for a poor country.
- The production function relates a. inputs to outputs. b. cost to input c. cost to output d. wages to profits.
- For a production function with a diminishing, but positive, marginal product of labor: a. Output increases at an increasing rate as more workers are employed. b. Output increases at a decreasing rate as more workers are employed. c. Output declines as
- Value added is the value of a firm's output minus: a) the value of intermediate goods purchased from other firms. b) the compensation it pays to employees. c) the value of its capital goods. d) its depreciation.
- Producer surplus is the: a) difference between the maximum price consumers are willing to pay and the minimum price producers are willing to accept. b) difference between producers' revenues and opportunity costs of production. c) opportunity cost of prod
- To minimize the cost of a particular level of output, a firm should produce where: a. labor input equal capital input. b. (MPl/MPk)=r/w (MP stands for marginal product, w is the wage rate, and r is the unit cost of capital). c. (MPl/MPk)=r/w. d. labor
- Diminishing marginal returns to short-run production begin when: A. the average product of labor begins to fall. B. the total product of labor begins to fall. C. marginal product of labor becomes negative. D. average variable cost begins to rise. E. margi
- Suppose the marginal product of labor is 10 and the marginal product of capital is 8. If the wage rate is $5 and the price of capital is $2, then in order to minimize costs the firm should use: A. more capital and less labor. B. more labor and less capita
- A firm is producing 10 units of output: marginal cost is $24 and average total cost is $6 at this level of output. The average total cost at 9 units of output is: (blank).
- A firm is currently producing 10 units of output; marginal cost is $24 and average total cost is $6 at this level of output. The average total cost at 9 units of output is: a) $4 b) $5 c) $6 d) $8 e) none of the above
- The long-run average cost of production might decrease as output increases due to? A. indivisible inputs, variable costs, and economies of scale. B. divisible inputs, specialization, and diseconomies of scale. C. indivisible inputs, specialization, and
- Assume that a purely competitive firm uses two resources, labor (L)and capital (C), to produce a product. The market price of this product is $1.00. The Marginal Product (MP) and prices of the resourc
- When a perfectly competitive firm employs one worker, it produces 20 units of output. When the same firm employs two workers, it produces 39 units of output. The firm sells its product for $10 per unit. What is the marginal revenue product connected with
- A firm produces output with capital and labor. Suppose currently the marginal product of labor is 21 and the marginal product of capital is 6. Each unit of labor costs $12 and each unit of capital co
- If a transaction or production creates negative externalities, then accounting for all costs and benefits would reveal that: a. the socially-optimal amount of production would be more than the private level of production. b. the private price is higher th
- A market economy over-allocates resources to the production of goods which involve. (a) spillover costs (b) spillover benefits
- When an economy shifts away from the production of consumer goods and toward the production of capital goods, for the average worker this trade-off means A. a higher standard of living. B. longer working hours. C. a lower savings rate (as a percentage of
- When a firm's marginal production of labor (MPL) starts to decline: a. the firm is producing output in the region of increasing marginal returns. b. the firm is producing output in the region of negative marginal returns. c. the congestion problem has
- If a factor of production presents a diminishing marginal product, this means: (a) as we increase the amount of all inputs, the marginal product of any one input eventually begins to decrease. (b) as we increase the amount of input, while keeping all othe
- The production possibilities frontier model shows that: a) if consumers decide to buy more of a product, its price will increase. b) a market economy is more efficient in producing goods and services than is a centrally planned economy. c) economic gro
- When does a firm Increase returns to scale occur?: a) average costs of production increase as its output increases.; b) average costs of production decrease as its output increases.; c) average fixed
- An expectation of a price increase in the future would cause consumers to _____ and producers to _____. a. accelerate consumption; accelerate production b. delay consumption; delay production c. delay production; accelerate production d. accelerate consum
- Competition is vitally important in a market economy because a. it directs resources toward firms producing low quality goods. b. it makes it possible for inefficient producers to earn profits if they supply only high quality goods. c. it weeds out high-c
- If a firm wants to maximize its profits, it should: a. equate the marginal revenue product for each input to the price of the input. b. hire unskilled labor rather than skilled labor since unskilled labor is cheaper. c. hire lots of capital and very lit
- The marginal revenue product is: a) the value of all the final goods and services produced by a firm. b) the value that a worker contributes to a firm. c) an increase in the profit of a firm with an increase in the output by one unit. d) the output pe
Explore our homework questions and answers library
Browse
by subject