Question

Provide a definition and a brief explanation of their importance in microeconomic analysis.

1) Economies of Scope vs. Economies of Scale;

2) MRPL;

3) Three features or characteristics a good must have to be regarded as a Giffen Good;

4) Allocative Efficiency.

Answer 1

1) Economies of Scope vs. Economies of Scale;Both are two different concepts which is used in order to help the company cost to cut .The economies of scope considers the average of total cost of producing a variety of goods or service where as the eceonomies of scale considers the advantage of cost which comes when the level of production of one good is higher.

2) MRPL; It is Marginal Revenue of product of labour which is the additional amount of revenue which a company can generate by recruiting addiotjnal employees .It can be found out by simply multipying the price of output to the amrginal product of labor .If the mrpl is equal the wage rate then the firm will demand more labor .

3) Three features or characteristics a good must have to be regarded as a Giffen Good;

• The good will be regarded as gifen good if the good have inferior and it must have inferior for lack of budget which can cause increased consumption
• if there is a lack of substitutes goods then the good is regarded as giffen good .
• If the good forms a larger %age of total consumption then also it is regarded as Giffen Good

4) Allocative Efficiency ; It is an output level whhere the marginal cost of the production is equal to the price because the amount which the consumer wants to pay is equal to the marginal utility which they will get .And in this case optimum distribution is achieved because marginal costb is equal to the marginal utility . This is allocative effiiciency .

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