Th3.4: ^^ X-inefficiency

Question 1

When is a firm X-inefficient?

Answer 1

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

Question 2

What is this a specific type of and why?

Answer 2

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

Question 3

Look at the example here:

Answer 3

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

Question 4

How can we tell if something is X-inefficient?

Answer 4

if they are not producing on the lowest AC curve

Question 5

Where does X-inefficiency often occur?

Answer 5

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