Economic Efficiency Flashcards

0
Q

If firms aren’t…

A

Efficient they will not have the ability to compete within a market

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1
Q

Economic efficiency definition

A

Is concerned with how well resources are used to resolve the three fundamental economic questions what, how and for whom production should take place

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2
Q

Production efficiency

A

Is when the costs of production is at its lowest this occurs in the long run- monopolistic comp

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3
Q

Firms with…

A

high unit labour costs may not be able to justify remaining within the market as the market price is driven down by the forces of competition

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4
Q

Allocative efficiency definition

A

When resources have been allocated in such a way that no consumers would be better off without making others worst off
This occurs in both the long run and short run
Price= marginal cost

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5
Q

X efficiency definition…

A

Occurs when firms have incentives to cut costs and so use the optimal combination of the factors of production

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6
Q

X efficiency means that..

A

Actual costs are as low as possible

Actual costs are higher than potential

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