3.4.1 Efficency Flashcards
1
Q
what are the 4 types of efficency?
A
- productive efficency
- allocative efficency
- X- inefficency
- Dynamic efficency
determines if firms are good/ bad for society
2
Q
what is productive efficency?
A
when Average total costs are at it’s lowest (MC= ATC)
3
Q
what is allocative efficency?
A
when MC= Price / AR/ Deamnd
apparently is the best for society (welfare maximise)
4
Q
what is X inefficency?
A
when for a given level of output, a firm’s costs are above it’s ATC
X-inefficency of £70
5
Q
what is dyanamic efficency?
A
- reinvestmnet on long run super normal profit back into business in the form of (investment) new capital/ resarch and de
- if supernormal profit can last in the long run, then firm has potential of being dynamically efficent
6
Q
why may there be X inefficency?
A
- public sector firms: lack of competive drive, want to maximise social welfare, waste creeping in as a result
7
Q
Table of efficiencies
A
