Homework Lance
Economic Efficiency
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Economic efficiency is a state of the economy whereby each resource available is optimized for service, such that all entities in the economy gain the highest possible benefit. Also, any costs incurred in such an economy are evenly distributed amongst all entities. At this state, no more changes can be implemented without harming some entities at the expense of others. For this condition of the economy to occur,
- all users need to attain an equal marginal benefit
- all suppliers have to incur a similar marginal cost
When the economy is in this condition, every new commodity a user acquires should offer them an additional fulfilment that is equivalent to what all other users attain. As for suppliers, whatever extra cost one producer incurs due to the production of one additional product should be the same for all providers.
Furthermore, the marginal benefit for each of the users should equal the marginal cost for all vendors. Whenever the equation shifts and the two are no longer equal, the society works collectively to remediate the scenario, if it yearns to sustain the economic efficiency. Thus, the benefits accessible to the members, as well as the costs they incur will be equal for everyone.
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