High School
SAT
ACT
University
MCAT
LSAT
DAT

Suppose there are two companies burning coal to generate electricity. The elect…

Related Topics

Wize University Microeconomics Textbook > Economic Efficiency and Government Intervention

Production and Allocative Efficiency

3 Activities

checklist
Mark Yourself Question
  1. Grab a piece of paper and try this problem yourself.
  2. When you're done, check the "I have answered this question" box below.
  3. View the solution and report whether you got it right or wrong.
Suppose there are two companies burning coal to generate electricity. The electricity generated is sold to the consumers, however coal burned generates a lot of smog pollution.

The marginal costs of abatement for both firms are:
MC1=10Q1MC_1=10Q_1 and MC2=3Q2+15MC_2=3Q_2+15

The government mandates both firms abate 4 units of pollution.

Is this efficient / optimal?

If not, why?
More Production and Allocative Efficiency Questions:
Practice: Markets and Efficiency
______________ market structure leads to productive efficiency and a _______________ market structure leads to allocative efficiency.
allocative efficiency
In productive efficiency every firm at industry level has the same
Suppose there are two companies burning coal to generate electricity. The electricity generated is sold to the consumers, however coal burned generates a lot of smog pollution.
The marginal costs of abatement for both firms are:
MC1=10Q1MC_1=10Q_1 and MC2=3Q2+15MC_2=3Q_2+15