6.4 Are Markets Efficient?

MyEconLab Concept Video

You’ve seen (previous page) that an efficient allocation of resources is the highest-valued allocation, and it occurs when marginal benefit equals marginal cost. Continuing with the pizza example, the efficient quantity of pizza is the quantity that people value most highly, the quantity at which the marginal benefit of pizza equals its marginal cost.

The market forces that you studied in Chapter 4 (previous page) determine the equilibrium quantity and equilibrium price and coordinate the plans of buyers and sellers. Figure 6.8 shows the market for pizza in equilibrium. The demand curve is D, the supply curve is S, the equilibrium price is $10 a pizza, and the equilibrium quantity is 10,000 ...

Get Foundations of Economics, 8th Edition now with the O’Reilly learning platform.

O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.