Efficency Flashcards
1
Q
Allocative efficiency
A
Is at an output which maximises total consumer welfare (MC=AR)
2
Q
AR
A
Demand curve and price
3
Q
MC
A
Supply curve
4
Q
AR=MC
A
This is because the price that consumers are willing to pay is equivalent to the marginal utility that they get (P=MC)
5
Q
Productive efficiency
A
Minimise costs and maximising output
When a firm maximises output whilst using minimum resources (MC=AC)
