Efficiency

Question 2

What is Perfect Competition?

Answer 2

1. Prices are set by the market (No one has the power to “set prices”)
2. Entry of new firms (or exit of unprofitable
   firms) drives profits to zero.
3. Buyers and sellers have all relevant information.

Question 3

What are the two types of efficiency?

Answer 3

1. Production (management) efficieny
2. Allocational (Pareto) efficiency

Question 4

What is it called when there is management inefficiency?

Answer 4

X-inefficiency