Econ Theme 3 - efficiency

Question 1

Productive Efficiency

Answer 1

Average cost at its lowest
MC = AC
Static

Question 2

Allocative Efficiency

Answer 2

Welfare is maximised
MC = AR
MC = PRICE
MC = DEMAND

Question 3

X-Inefficiency

Answer 3

when a firm is producing above its AC curve for a given level of output.
x -Inefficiency can be shown as the gap between their AC and the AC curve.

Question 4

Dynamic Efficiency

Answer 4

How changing tech improves a firm’s output potential over time
Need to make SNP (AR>AC) so firm has some money to invest in R&D