14- Efficiency

Question 1

Productive efficency definition?

Answer 1

Where no additional output can be achieved given factor inputs.

Question 2

At what point is a firm productively efficient?

Answer 2

• Lowest point on AC curve

- AC=MC

Question 3

Allocative efficiency definition

Answer 3

Where consumer satisfaction is maximised in the production of goods and servies.

Question 4

At what point is a firm allocatively efficient?

Answer 4

Where P=MC

Question 5

Overallocation of resources?

Answer 5

P < MC

Question 6

Under allocation of resources?

Answer 6

P>MC

Question 7

Economic efficiency definition

Answer 7

When there is productive and allocative efficiency at the same time?

Question 8

At what point is a firm economically efficient?

Answer 8

• P=MC=lowest point on AC curve

Question 9

Dynamic efficiency

Answer 9

When there is lack of short run efficiency as firms aim to lower long run costs through investment.

Question 10

X inefficiency?

Answer 10

Where firms have no incentive to lower costs e.g. monopolies or state run organisations.

Question 11

At what point is a firm X efficient?

Answer 11

Any point on AC curve.