Markets Terminologies

Question 1

Dynamic efficiency

Answer 1

Re-investment of Super Normal Profit into R&D innovation

e.g. technology advancements

Supernormal profit in SR

Lead to a shift in LRAS

Question 2

X-efficiency

Answer 2

-Firms producing at any point on the AC Curve
-Production with no waste

Question 3

Productive efficiency

Answer 3

the ability of a firm to produce goods or services at the lowest possible cost, given the level of output and the available technology

-lowest point of AC

-Any point on the PPF curve

-MC=AC

Question 4

Allocative efficiency

Answer 4

Allocational or allocative efficiency is an efficient market whereby all goods and services meet the needs and wants of society

-P=MC
-where Demand = Supply maximising consumer surplus

Question 5

Sales Maximisation

Answer 5

AR=AC

Question 6

Revenue Maximisation

Answer 6

MR=0

Question 7

Profit Maximisation

Answer 7

MR=MC

Question 8

Profit Satisficing

Answer 8

Refers to when a business makes enough profit to satisfy its needs

-e.g. enough profit to pay shareholders dividends, enough profit to pay workers a good wage

-Due to the pandemic many businesses have changed their objectives to survival- i.e. surviving is fast-changing and challenging condition