Efficiencys

Question 1

What is allocative efficiency

Answer 1

Allocative efficiency is when resources follower consumer demand, society surplus is maximised and net social benefit is maximised
- this occurs at p=mc as it is there where demand is equal to supply

Question 2

What is Productive efficiency

Answer 2

• Productive efficiency is when a firm is producing at its lowest point on the average cost curve which means they are fully exploiting economies of scale and minimising costs
• this occurs at the lowest point on the average cost curve

Question 3

What is x-efficiency

Answer 3

• X efficiency is when firms are minimising waste and there are no extra costs
• this occurs if the firm is producing on their cost curve
• if they are producing above they are x-inefficient

Question 4

Why would firms be x inefficKent

Answer 4

• lack of a competitive drive such as monopolies
• public sector firm who is more bothered with public welfare