market structure , efficiency and resource allocation

Question 1

when does Allocative efficiency occur?

Answer 1

occurs at the level of output where average revenue= marginal cost (AR=MC)
At this point, resources are allocated in such a way that consumers and producers get the maximum possible benefit
Demand = supply
No one can be made better off without making someone else worse off
There is no excess demand or supply

Question 2

when does productive efficiency occur?

Answer 2

occurs at the level of output where marginal cost = average cost (MC=AC)
At this point, average costs are minimised
There is no wastage of scarce resources and a high level of factor productivity

Question 3

what is dynamic efficiency ?

Answer 3

it is long term efficiency and is a result of innovation as a firm reinvests its profits
It results in improvements to manufacturing methods
This lowers both the short-run and long-run average total costs
Other types of efficiency can drive dynamic efficiency
E.g If productive efficiency is driven by technological advancements and innovation, it can reduce costs over time

Question 4

what are examples of imperfect competition market structures

Answer 4

monopolistic
oligopoly
monopoly

Question 5

what influences dynamic efficiency ?

Answer 5

its influenced by the firm reinvests its profits
They can reduce long term costs by investing in research and development, human capital and capital

Question 6

what would investing in research and development allow?

Answer 6

allows firms to allocate resources in the most optimal way. By identifying changing needs of consumers, firms can develop goods and services that match those need

Question 7

what would investing in humans capital do?

Answer 7

Investing into human capital through education, training and rewards, it incentivises employees to increase labour productivity

Question 8

what would investing into capital do?

Answer 8

such as technology, can improve production processes and result in long-term cost reductions
E.g Implementing automated technological advancements decreases production costs over time

Question 9

what is static efficiency?

Answer 9

when a firm produces goods and services at the lowest possible cost, given the current technology and resources, without any improvement over time