Economic Efficiency Principles Quiz

Efficiency is achieved when total surplus, which is the sum of consumer and producer surplus, is maximized.

Cost efficiency refers to minimizing the costs of production rather than maximizing total surplus.

While efficiency aims to maximize overall welfare, equity concerns the fairness of the distribution of resources and outcomes.

Technical efficiency refers to producing goods and services using the fewest possible resources, including the latest technology.

Economic efficiency principles are used to ensure that resources are allocated in a way that maximizes overall societal welfare.

Allocative efficiency ensures resources are allocated in a way that maximizes societal welfare.

Productive efficiency focuses on minimizing the cost of producing a given level of output.

Allocative efficiency ensures that resources are allocated to produce the combination of goods that maximizes societal welfare.

Productive efficiency is achieved when a firm produces at the lowest point on its average cost curve, minimizing costs for a given level of output.

Marginal benefit represents the additional satisfaction gained from consuming one more unit of a good or service.

Dynamic efficiency emphasizes the ability of an economy to adapt and innovate over time.

Perfect competition leads to allocative efficiency because firms produce at the quantity where marginal cost equals price, maximizing total surplus.

Pareto efficiency occurs when it is impossible to make one individual better off without making another individual worse off.

While efficiency aims to maximize overall welfare, equity concerns the fairness of the distribution of resources and outcomes, leading to potential conflicts.

Consumer surplus measures the difference between what consumers are willing to pay and what they actually pay, indicating the net benefit from consuming a good.