Efficiency Flashcards
1
Q
What is productive efficiency?
A
Where maximum is produced from a fixed amount of output OR at the lowest AC
2
Q
What is allocative efficiency?
A
The optimum quantity of good is produced — no welfare loss i.e no market failure (P=MC) (MC=AR)
3
Q
What is technical efficiency?
A
When no resources are wasted and costs are minimized for a given level of output
It is X-inefficient if the price is set higher than the AC
4
Q
What is dynamic efficiency?
A
A firm can reinvest their supernormal profit into cost-saving techniques & become more efficient
