Asked by Stephen Sieczkowski on Jul 11, 2024
Verified
We would expect a cartel to achieve:
A) both allocative efficiency and productive efficiency.
B) allocative efficiency but not productive efficiency.
C) productive efficiency but not allocative efficiency.
D) neither allocative efficiency nor productive efficiency.
Allocative Efficiency
A state of the economy where resources are allocated in a way that maximizes the overall benefit to society.
Productive Efficiency
Occurs when a good or service is produced at the lowest possible cost, utilizing all resources efficiently.
Cartel
A formal agreement among firms (or countries) in an industry to set the price of a product and establish the outputs of the individual firms (or countries) or to divide the market for the product geographically.
- Assess the impact of market structures on allocative and productive efficiency.
Verified Answer
CF
Cagayare fanax FanaxJul 16, 2024
Final Answer :
D
Explanation :
Cartels typically restrict output to raise prices, leading to neither allocative efficiency (where resources are allocated in a way that maximizes the net benefit to society) nor productive efficiency (where goods are produced at the lowest possible cost). This results in a misallocation of resources and higher prices than in competitive markets, harming consumers.
Learning Objectives
- Assess the impact of market structures on allocative and productive efficiency.