Advantages of leaving resource allocation, Macroeconomics

What are the advantages of leaving resource allocation to price allocation?

Ans) The 5 benefits are Neutral, Flexible, Freedom of choice, No administrative cost and lastly Diminished incentives. Distinguish among diminishing returns and diseconomies of scale. Diseconomies of scale I guess means as you make more it becomes more costly to produce.

For example, you make output 1 for $2 but output 2 for $5 thus the second one needed $3

Now let us say input for output 1 had to be doubled for input 2. One land gave output 1. Output 2 required 2 lands. Then there are not diminishing returns.

Though, as second land was costing $3 there was diseconomies of scale.

 

Posted Date: 4/1/2013 5:04:16 AM | Location : United States







Related Discussions:- Advantages of leaving resource allocation, Assignment Help, Ask Question on Advantages of leaving resource allocation, Get Answer, Expert's Help, Advantages of leaving resource allocation Discussions

Write discussion on Advantages of leaving resource allocation
Your posts are moderated
Related Questions
Suppose the banking system has reserves of $750,000, demand deposits of $2,500,000 and a reserve requirement of 20%. a) If the Fed now purchases $125,000 worth of government bon

#questionAssume that an economy''s GDP Y=5000. Also assume that the government runs a deficit where tax revenue T=1000 and government expendituresG= 1500. The consumption function

the classical model assumes that consumption depends positively on disposable income. now suppose that consumption also depends on the real interest rate. a) sketch the loanable

Filbert and Lychee have convex indifference curves. Note Filbert is indifferent between baskets (3, 2) and (4, 1)--these are x, y coordinates. Lychee is indifferent between baskets

What is Trade liberalisation Trade liberalisation is the removal of barriers to trade. This has mainly taken the form of restrictions created by national governments like quot

Price 10,9,8,7,6,5,4,3,2,1 QD 0,1,2,3,4,5,6,7,8,9,10 TR? Ed?.

Classical Quantity Theories Quantity theories have had a long history and a widespread use in economics. As originally formulated these were not explicitly designed as theories

The demand for nominal balances rises with the price level. At the similar time inflation causes the real demand for money to fall. Describe how these two assertions can be both co

. (40 points) Consider two consumers, A and B. A and B both want perfect consumption smoothing (c = cf) and both have no current wealth. However, the two consumers have different i

Consumer Prices Index Two economic indices learnt at AS are the Consumer Prices Index (CPI) and the Retail Prices Index (RPI). Both are used to calculate the average price lev