3.4.1 - Efficiency

Question 1

What is productive efficiency?

Answer 1

depends on using all available economies of scale and resources

Question 2

Productive efficiency value

Answer 2

productive efficiency = minimum point on AC (MES)

Question 3

What is allocative efficiency?

Answer 3

when a firm produces a range of goods with scarce resources to meet demands.
firms change prices = MC of making the good

Question 4

Allocative efficiency value

Answer 4

allocative efficiency = AR (price) = MC
producing where supply = demand

Question 5

What is technical efficiency

Answer 5

any output is produced with the minimum quantity of inputs. Any point on LRAC showing minimum cost level of technically efficient

Question 6

What is productive inefficiency?

Answer 6

when output is not Minimum Average Cost (MAC) of production

Question 7

What is allocative inefficiency

Answer 7

price is not marginal cost (MC)

Question 8

What is X-inefficiency?

Answer 8

internal inefficiency, usually in a monopoly who have no incentive to be efficient

Question 9

What is dynamic efficiency?

Answer 9

all resources allocated efficiently over time, innovation is at optimum level and leads to a decrease in LRAC