a) Types of efficiency

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Last updated 7:40 PM on 6/28/26
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4 Terms

1
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  • define allocative efficiency

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  • state the benefits of allocative efficiency

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  • state when allocative efficiency is achieved

  • when a firm produces the most desired output level by consumers

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  • no excess supply/excess demand

  • maximised consumer surplus/producer surplus

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  • MC = AR

2
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  • define productive efficiency

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  • state the benefits of productive efficiency

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  • state when productive efficiency is achieved

  • when a firm produces the maximum output with the minimum cost

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  • minimised ATC

  • no wasted resources

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  • MC = AC

3
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  • define dynamic efficiency

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  • state the benefits of dynamic efficiency

  • when a firm reinvests its profit

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  • upgraded capital/product

  • reduced LRAC

4
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  • define x-inefficiency

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  • state why some firms are x-inefficient

  • when a firm produces with a higher than necessary ATC

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  • lack of competition