Types of Effciency Flashcards
1
Q
Name the 4 types of efficiency
A
Productive efficiency
Allocative efficiency
Dynamic efficiency
X-Inefficiency
2
Q
Define productive efficiency
A
When average cost is it at its lowest. When AC = MC
3
Q
Define allocative efficiency
A
Where welfare is maximised. When MC = price (AR) (Demand)
4
Q
Define X inefficiency
A
When a firm is producing above average cost curve for a given level of output
5
Q
Define dynamic inefficiency
A
When changing technology improves a firm’s output potential over time
- firm needs to be making supernormal profit to invest in new tech
6
Q
At what point on the curve is supernormal profit?
A
Where AR is greater than AC
7
Q
A
