economic efficiency
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Last updated 10:58 AM on 12/1/22
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7 Terms
1
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where does allocative efficiency occur?
where AR = MC
2
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where does productive efficiency occur?
where AC = MC
3
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when does dynamic efficiency occur?
when supernormal profits are made
4
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x-inefficiency
when a firm chooses to not lower AC leading to organisational slack
mainly occurs where there is a lack of competition so firms have little incentive to cut costs; most often when there is a monopoly
mainly occurs where there is a lack of competition so firms have little incentive to cut costs; most often when there is a monopoly
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allocative efficiency
occurs when resources are used to produce goods and services which consumers want and value mos highly and social welfare is maximised
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productive efficiency
where a firm operates at its lowest point on the AC curve; where producers minimise their wastage of resources
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dynamic efficiency
occurs where supernormal profits are being made which can then be reinvested into the business for r&d and to innovate
Note 
Flashcards (25)