Efficiency Flashcards

1
Q

What does efficiency judge

A

How well the market allocates resources and the relationship between inputs and outputs

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2
Q

What is the point for Allocative Efficiency

A

P/AR = MC

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3
Q

What is Allocative Efficiency

A

When resources are used to produce goods that consumers want and value the most, maximises social welfare

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4
Q

What is the point for productive efficiency

A

MC = AC

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5
Q

What is productive efficiency

A

Producing at the lowest AC so the fewest resources are used to create maximum output, only possible with technical efficiency

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6
Q

What is technical efficiency

A

Producing a given output with minimum inputs

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7
Q

Dynamic Efficiency

A

Retained profits cause investment and innovation brings in new products and production methods which improves both efficiencies in the long run

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8
Q

X - Inefficiency

A

Higher production costs than is necessary for their specific level of output, they aren’t producing on the AC

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9
Q

Static Efficiency

A

When all resources and production is as efficient as it can be at that set point in time

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10
Q

what does X - Inefficiency do to the AC curve

A

shift it upwards

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11
Q

what does dynamic efficiency do to the AC curve

A

shift it down in the long run

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