a) Types of efficiency

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Last updated 6:04 PM on 4/20/26
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4 Terms

1
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  • define allocative efficiency

  • state the benefits of allocative efficiency

  • state when allocative efficiency is achieved

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

  • no excess supply/excess demand

  • maximises consumer surplus/producer surplus

  • MC = AR

2
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  • define productive efficiency

  • state the benefits of productive efficiency

  • state when productive efficiency is achieved

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

  • ATC is minimised

  • no resources are wasted

  • MC = AR

3
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  • define dynamic efficiency

  • state the benefits of dynamic efficiency

  • when a firm reinvests its profit

  • upgrades capital/product

  • reducing LRAC

4
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  • define x-inefficiency

  • state why some firms are x-inefficient

  • when a firm produces with a higher ATC than necessary

  • lack of competition