Market structure, static efficiency, dynamic efficiency and resource allocation Flashcards
What is static efficiency?
Static efficiency refers to the optimal allocation of resources at a specific point in time, ensuring that goods and services are produced and distributed in a way that maximizes total welfare without considering changes over time.
What is dynamic efficiency?
Dynamic efficiency involves the optimal allocation of resources over time, focusing on innovation, technological advancements, and improvements in production processes that enhance long-term welfare.
What is productive efficiency?
Productive efficiency occurs when firms produce goods and services at the lowest possible cost, typically where average total costs are minimized.
What is allocative efficiency?
Allocative efficiency is achieved when the price of a good or service equals its marginal cost (P = MC), indicating that resources are distributed in a way that maximizes total welfare.
What factors influence dynamic efficiency?
Dynamic efficiency is influenced by factors such as research and development (R&D), investment in human and non-human capital, and technological change, all of which drive innovation and productivity improvements over time.
