3.4.1 - efficiency
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5 Terms
what are the four types of efficiency
allocative efficiency
productive efficiency
dynamic efficiency
X-inefficiency
allocative efficiency
definition and point on graph
DEFINITION: resources allocated so consumers and producers receive the maximum possible benefit
POINT ON GRAPH: AR = MC
productive efficiency
definition and point on graph
DEFINITION: no wastage of scarce resources
POINT ON GRAPH: MES of the AC curve
dynamic efficiency
definition and point on graph
DEFINITION: when a firm reinvests its profits to improve production (and reduce costs)
POINT ON GRAPH: when there’s supernormal profit
X-inefficiency
definition and point on graph
DEFINITION: when a firm lacks incentive to control production costs
POINT ON GRAPH: AC higher than it should be
Note 
Flashcards (21)