ECON 1000 Study Guide - Midterm Guide: Sunk Costs, Takers, Investment Banking
Document Summary
3 types of economies: centrally planned economy: an economy in which the government decides how economic resources will be allocated, market economy: decisions of households and firms interacting in markets allocate economic resources. Determines who gets what: mixed economy: most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources. Efficiency issues: market economics tend to be more productive because of , productive efficiency: goods/services are produced at the lowest possible cost, allocative efficiency: production is in accordance with consumer preferences. Every good/service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it: people are getting what they actually want. Caveat about market economies: markets may not result in fully efficient outcomes, people might not immediately do things in most efficient way, governments might interfere, might ignore things like pollutions.
