economic efficiency

where doe

where does allocative efficiency occur?

where AR = MC

where does productive efficiency occur?

where AC = MC

when does dynamic efficiency occur?

when supernormal profits are made

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

allocative efficiency

occurs when resources are used to produce goods and services which consumers want and value mos highly and social welfare is maximised

productive efficiency

where a firm operates at its lowest point on the AC curve; where producers minimise their wastage of resources

dynamic efficiency

occurs where supernormal profits are being made which can then be reinvested into the business for r&d and to innovate