CHAPTER 54 EFFICIENCY

Question 1

Allocative or economic efficiency

Answer 1

Occurs when scarce resources are used to produce a bundle of goods which satisfies consumer preferences and maximises their welfare.

Question 2

Dynamic efficiency

Answer 2

Occurs when resources are allocated efficiently over time.

Question 3

Productive efficiency

Answer 3

Achieved when production is achieved at lowest average cost.

Question 4

Static efficiency

Answer 4

Occurs when resources are allocated efficiently at a point in time.

Question 5

Technical efficiency

Answer 5

Achieved when a given quantity of output is produced with the minimum number of inputs.

Question 6

Welfare economics

Answer 6

The study of how an economy can best allocate resources to maximise the utility or economic welfare of its citizens.

Question 7

x-inefficiency or organizational slack

Answer 7

Inefficiency arising because a firm or other productive organisation fails to minimise its average costs of production at a given level of output.