LS7 - Efficiency

Question 1

Efficiency

Answer 1

How well resources, such as time, talents, equipment, materials, are used to produce an end result

Question 2

Productive efficiency

Answer 2

Minimum average cost at which output can be produced
Minimising average cost per ouptut - lowest point of AC curve

Question 3

Allocative efficiency

Answer 3

Producing the ideal amount of a good that consumers wish to buy - P = MC
Maximising welfare and meets demand of consumers

Question 4

Dynamic efficiency

Answer 4

How changes in technology and productive tehcniques over time will increase productive potential of the firm

Question 5

X-inefficiency

Answer 5

Occurs when current AC is higher than lowest possible AC
Occurs in monopoly and oligopolies (highly concentrated markets) - firms are able to make SN profits, and so do not have incentive to lower AC, so X-inefficiency doesnt decrease