EFFICIENCY

Question 1

ALLOCATIVE EFFICIENT DEFINITION

Answer 1

Allocative efficiency occurs when the price of the good is equal to what the consumer wants to pay for it.

Question 2

THINGS ABOUT ALLOCATIVE EFFICIENCY

Answer 2

~Can’t achieve allocative efficiency unless there is perfect competition.
~Price=Marginal costs

Question 3

DYNAMIC EFFICIENCY DEFINITION

Answer 3

~Improving efficiency in the long run, refers to the eagerness of firms to carry out r&d to improve existing products and developing new ones.
~Investing in new technology or training to improve the production process and reduce production costs.

Question 4

STATIC EFFICIENCY DEFINITION

Answer 4

This is when a firm is both allocative and productive efficient. It can only occur in the short run due to changes in the market.

Question 5

X-EFFICIENCY DEFINITION

Answer 5

measures how successfully a firm keeps their costs down

Question 6

X-INEFFICIENCY

Answer 6

Inefficiency caused by unnecessary costs and waste.
➳means that production costs could be lower.