essay Flashcards
Allocative efficiency
occurs when the available economic resources are used to produce the combination of goods and services that best matches peoples tastes and preferences.
Productive efficiency
this is achieved in an economy when it is not possible to make anyone better off without making someone worse off, or you cannot produce more of one good without producing less of another.
Where is productive efficiency
at Q, the lowest point of AC
where is allocative efficiency
at Q where P=MC
is there dynamic efficiency
-no means because there is no supernormal profit in a comp market
-no incentive bc there is perf knowledge
-yes incentive bc economists argue that in an area of supernormal profit there is an incentive
where is revenue maximisation
when MR=0 (doesn’t occur in a perf competitive market)
where is sales maximisation
where AC=AR (comp firms do)
