Th3.4: ^^ X-inefficiency Flashcards

1
Q

When is a firm X-inefficient?

A

if it fails to minimise its average cost at a given level of of output, it is x-inefficient and there is organisational slack

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2
Q

What is this a specific type of and why?

A

specific type of productive inefficiency as it occurs when they fail to minimise their cost for that specific output

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3
Q

Look at the example here:

A

For example, the minimum point on the AC curve may be at 100 goods at a cost of
£5 each. The firm is producing 125 goods and so is not productively efficient. It costs
them £8 to produce each good, but they could produce 125 goods at £7. Therefore,
they are X-inefficient since they are not producing on the lowest AC curve

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4
Q

How can we tell if something is X-inefficient?

A

if they are not producing on the lowest AC curve

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5
Q

Where does X-inefficiency often occur?

A

where there is a lack of competition so firms have little incentive to cut costs

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