Managerial Economics 12th Edition by Christopher Thomas,Charles Maurice

Exercise 3

Engineers at a national research laboratory built a prototype automobile that could be driven 180 miles on a single gallon of unleaded gasoline. They estimated that in mass production the car would cost $60,000 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?