ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Explain the difference between productive and allocation efficiency. How do you think a centrally planned economy versus a market economy would perform under each measure of efficiency
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Productive efficiency is the optimal way to produce goods and services at the lowest possible cost, while allocative efficiency deals with the optimal distribution of goods and services. In an economy, it might be effectively productive, but it may not be allocatively efficient. For example, it may be productively efficient to produce a large quantity of gloves at a lower cost, but if they were for the left hand, it would be allocatively inefficient because no one would benefit from this low production cost.
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- Using an economic point of view, please describe and explain the following two situations: Describe how you might determine the economically efficient number of exit doors on an airline, or the economically efficient number of safety marshals assigned to an airline flight. In 1938, the FDA was given the authority to require drug manufacturers to test and prove the safety of their product before distribution. What are some opportunity costs of this decision?arrow_forwardA fast-food company spends millions of dollars to develop and promote a new hamburger on its menu only to find that consumers won't buy it because they don't like the taste. From an economic perspective, the company should keep the hamburger on the menu because they've spent so much money and time developing and promoting the product. spend more money to develop a more efficient way to cook the hamburger so it cooks in a shorter time. pull the hamburger off the menu and treat the development and promotion expenditures as a sunk cost. keep trying to sell the hamburger so that people who developed and promote it have a job with the company.arrow_forwardScarcity and choice are important in economics because there would be no economy if there was no scarcity (limitation in resources) and no choice as to how these resources would be used. Scarcity and choice are the founding blocks of the story of economics. Scarcity in economics refers to limited resources against unlimited wants. Choice is the alternative between them. Economics deals with the study of human behavior and how humans allocate their limited resources (scarcity) with their unlimited wants. Since we have limited resources, we usually have to choose one option (choice) and forgo the other. This phenomenon is called "opportunity cost" . Our wants change when we consume more of one particular option, Its value diminishes and we start preferring some other option. This is called 'utility' or 'diminishing utility' as a progressive term. Example: If you are in school and you only have $10 for lunch money (scarcity), you can either buy a…arrow_forward
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- in the context of a market system, which of the following statements is incorrectarrow_forwardDraw, label and explain the Hayekian Triangle. How does this diagram provide a concise depiction of the process of production in a market economy? ( can you type the answers & draw the graph)?arrow_forwardHow do you think a centrally planned economy versus a market economy would perform under each measure of efficiency?arrow_forward
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