Explain why resources are allocated efficiently among firms and why output is distributed efficiently among households in perfectly competitive markets.

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Chapter 12 Assignment (taken from CFO Chapter 12 Problems section)

Please type your responses to the questions below. Keep the answers brief and covering key points.

1. Explain why resources are allocated efficiently among firms and why output is distributed efficiently among households in perfectly competitive markets.

2. Under what condition would society benefit from more of a good being produced, and under what condition would society benefit from less of a good being produced.

3. Each instance that follows is an example of one of the four types of market failures discussed in Chapter 12. In each case, identify the type of market failure and defend your choice briefly.

1. Everyone in town would benefit from the acquisition of two new fire engines, but the town does not have the money to pay for them and no one is willing to purchase and donate them to the town.

1. The only gas stations in a small town all agree to raise their prices.

1. Your electrician convinces you that you need to replace your entire breaker box when all you really need is a new breaker switch.

1. Your neighbor refuses to vaccinate his children for measles.