3.1.14 the role of free and competitive markets in promoting an efficient allocation of resources and improves living standards Flashcards
1
Q
How does a perfectly competitive market promote allocative efficiency?
A
Resources are allocated to produce goods and services that maximize societal welfare, as firms respond to consumer demand.
2
Q
What is technical efficiency, and how does a free and competition market promote it?
A
Technical efficiency occurs when firms produce at the lowest cost, minimizing waste. Competition forces firms to operate efficiently or risk being outcompeted.
3
Q
What is intertemporal efficiency?
A
It is the optimal allocation of resources over time to balance current consumption with future needs, ensuring sustainability.
4
Q
How does the price mechanism help allocate resources efficiently?
A
