Engineers at a national research laboratory built a prototype automobile that could be driven 180 miles on a single gallon of unleaded gasoline. They estimate that in mass production the car would cost $40,000 per unit to build. The engineers argued that Congress should force U.S. automakers to build this energy-efficient car.
a. Is energy efficiency the same thing as economic efficiency? Explain.
b. Under what circumstances would the energy-efficient automobile described here be economically efficient?
c. If the goal of society is to get the most benefit from its limited resources, then why not ignore economic efficiency and build the energy saving automobile?
Do some research then take a shot. I or others wil critique your thinking
a. Energy efficiency and economic efficiency are not the same thing. Energy efficiency refers to the ratio of useful energy output to the energy input, which measures how effectively energy is being utilized. On the other hand, economic efficiency refers to the allocation of resources that maximizes societal welfare. Economic efficiency takes into account factors such as production costs, consumer demand, and overall well-being. While energy efficiency is an important aspect of economic efficiency, it is not the sole determining factor.
b. The energy-efficient automobile described here would be economically efficient under certain circumstances. One key factor would be the price of gasoline. If the price of gasoline is high, the cost savings achieved through the prototype automobile's fuel efficiency may offset the higher initial cost of production. Additionally, if there is significant consumer demand for energy-efficient vehicles and they are willing to pay a premium for them, the higher production costs may be justified by the potential market value of the car. In such cases, the energy-efficient automobile may be economically efficient.
c. Ignoring economic efficiency and solely focusing on energy efficiency when making decisions about resource allocation can lead to suboptimal outcomes. Economic efficiency considers the trade-offs between different uses of resources and aims to maximize overall societal welfare. By ignoring economic efficiency, we risk potentially allocating resources in a way that doesn't generate the highest value for society. For instance, if the production costs of the energy-saving automobile are significantly higher compared to alternative vehicles, it may not be economically efficient to allocate resources towards its mass production. Society needs to consider both energy efficiency and economic efficiency to ensure the most optimal outcome in terms of resource allocation and overall societal benefit.