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AsadQ1 AsadQ1
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A year ago
A free-market economy with perfect allocative efficiency does not exist in reality. Why?

▸ The assumption of utility maximization is not a realistic assumption about the behaviour of consumers.

▸ Government intervention in the economy prevents the economic forces that would eventually bring the market to an allocatively efficient outcome.

▸ The decentralization of economic power in a free-market economy does not allow for allocative efficiency.

▸ Firms in many industries have some degree of market power and face negatively sloped demand curves, and produce a level of output where P > MC.

▸ The assumption of profit-maximization is not a realistic assumption about the behaviour of firms.
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Microeconomics

Microeconomics


Edition: 17th
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Ludacris2065Ludacris2065
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A year ago
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AsadQ1 Author
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A year ago
Correct Slight Smile TY
hpascoe
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Yesterday
You make an excellent tutor!
fgarza2146
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2 hours ago
Thank you, thank you, thank you!
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