ANSWER TO THE QUESTION NO 01

Invested in firm(forgone the interest on it) = $50000

Jack’s forgone income = $30000

Jill’s income for the job (she put on held) =$ 15000

Depreciation on machinery = $2000

THE TOTAL IMPLICIT COST = $97000

Cost of brought equipments = $30000

Wage of employee = $20000

Goods and services brought from another firm = $10000

THE TOTAL EXPLICIT COSST = $60000

ANSWER TO THE QUESTION NO 02

Technological efficiency happens when a firm produces the required amount of goods by using the
minimum amount of inputs. Using the latest technology doesn’t mean that a firm's production process is
technologically efficient. Until the firm is getting the maximum possible output for a minimum inputs, it
is technologically efficient

ANSWER TO THE QUESTION NO 03

Economic efficiency happens when the firm produces the required amount of output at the least cost. If
a firm can decrease production costs by decreasing output, it is not necessarily economically inefficient.
If it is producing the new level of output at the least possible cost, it is achieving economic efficiency

ANSWER TO THE QUESTION NO 04

The main difference between technological and economic efficiency is that the economic efficiency is
about the total value of all inputs used(capital, labour ) to produce goods on the other hand
technological efficiency is about the quantity of inputs used in production for a required amount of
output. Technological efficiency happens when a firm produces the required amount of goods by using
the minimum amount of inputs. Economic efficiency happens when the firm produces a required
amount of output at the least cost.
Economic efficiency requires technological efficiency, but technological efficiency does not require
economic efficiency. And a technologically inefficient method is never economically efficient.

ANSWER TO THE QUESTION NO 05

The mix of resources used in firms for production, such as large amounts of capital and less amount of
labour versus small amounts of capital and large amount of labour, depends on the firm type and policy.

For example, a car manufacturing is a big company and it uses lots of capital and less labour to make the
production process more efficient and as it is a big company it can invest much capital to avoid labour
intensive method. On the other hand a small garment factory may use less capital and lots of labour as it
doesn’t have much capital and the business is not that big enough to invest much capital.

By using lots of capital and not much labour a firm may become technologically efficient on the other
hand a firm using no much capital and lots of labour and not much capital may achieve economical
efficiency

ANSWER TO THE QUESTION NO 06

Usually utility of goods and services depends on the preferences and income of people. If the marginal
utility of all goods are equalized that means utility of all goods will be same but because of decreasing in
the marginal utility ,marginal benefit will keep decreasing no matter what good it is.

On the other hand, if the marginal utility per pound spent on each good are equalized, it will end up
maximizing the utility. Because of the law of decreasing the marginal benefit ,we may not get the same
utility on every pounds of our income. But if it’s equalized ,in that case we will get the same utility for
every pound and it will maximize utility.

ANSWER TO THE QUESTION NO 07

Markets with a price ceiling or price floor, taxes, subsidies or quotas, monopoly, external costs or
external benefits, or public goods or common resources may result in the quantity produced being the
efficient quantity

Price ceiling or price floor : Price ceiling or price floor is the legal amount of money that should be paid.

In case of price ceiling(regulation that makes it illegal to charge a price higher than a specified level),the
situation is under equilibrium quantity that can result in shortage. In this case it might not ensure
efficient quantity.

In case of price floor (a regulation that makes it illegal to pay a price below a specified level), the
situation will be above equilibrium quantity that can result in surplus. In this case, it might not ensure
efficient quantity.
Taxes : If the taxation gets changed (increase or decrease), may result in the quantity produced being
the efficient quantity. For example, if the tax for one good rises, people will consume it less so the
eventually the quantity production of that product will decrease. So the produced quantity will be
efficient.

Subsidies or quotas: subsidies increases the price recived by sellers and decreases the paid price of the
consumers. in this case the quantity produced will increase and it will make the produced quantity ,
efficient quantity.

Quotas limits the supplies. So because of the restriction the production will be less than the efficient
quantity. So it actually stops the production quantity to be efficient quantity.

Monopoly: It’s goal is to maximize the profit so to achieve a higher price the producers decrease the
quantity of production.So the produced quantity is not the efficient quantity.

External cost or external benefit: External cost is not borne by the producers it’s borne by the people.
So, the produced quantity is more than the efficient quantity.

External benefit is occurs to the people other than the buyer of the good. So there is a shortage in the
market. In this case the produced quantity doesn’t result it in efficient quantity.

Public goods and common resources : Public goods are those goods and services those are consumer by
all even if they don’t pay for it .so as a result the competitive market will produce the goods or services
less than the efficient quantity.

Common resources are not owned by anyone and used by all. The competitive market tend to overuse it
so the quantity may be insufficient

ANSWER TO THE QUESTION NO 08

A deadweight loss is a result of market inefficiency created by the entire society, when supply and
demand are not in equilibrium point is known as deadweight loss. Which means either it is
overproduction or underproduction of one good . For example, people uses a lot of mobile phone now
a days so if government increases a tax on mobile phone thinking of getting more tax but eventually the
number of demand and selling of mobile phone decreases then the money the government used to get
earlier as tax is the deadweight loss as now they are not even getting that.

Deadweight loss can occur because of an inefficient quantity of goods. Price ceilings, such as price
controls and rent controls; price floors, such as minimum wage and living wage laws; and tax system. If
the market is not in equilibrium, it may create deadweight losses too.

ANSWER TO THE QUESTION NO 9

No, in a competitive market ,deadweight loss usually doesn’t occur when the quantity produced equals
the competitive equilibrium quantity and the resource allocation is efficient.
Competitive market is where there are more than one producers produce the same goos and services in
order to compete to with one another. So one can dominate the market. As a result there can’t be a
suddent change in the market that can cause a deadweight loss. Moreover deadweight loss occurs
because of market inefficiency created by the entire society, when supply and demand are not in
equilibrium point means either there is under production or overproduction ,deadweight loss occurs .If
the quantity produced equals the competitive equilibrium quantity and the resource allocation is
efficient, there won’t be any deadweight loss.