Efficiency Flashcards
1
Q
What is allocative efficiency
A
AR = MC.
when a firms allocation of resources maximizes social welfare.
2
Q
What is productive efficiency
A
when a firm produces goods and services at the lowest average cost
3
Q
What is dynamic efficiency
A
The productive efficiency of a firm over a period of time
4
Q
What’s x inefficiency
A
When firm is not operating at the AC curve.
When lack of competition leads to higher average cost than with competition
5
Q
Whats is the short-run shut down point
A
when a firm stops production in the short run because its price per unit is below average variable cost
When AR = AVC
6
Q
Whats long-run shut down point
A
When a firm exits the industry in the long run because it is making a loss,
TC > TR
