Efficiency Flashcards
What is productive efficiency?
When production is achieved with minimum inputs, producing maximum output, at the lowest average cost.
What is economic efficiency?
When output is maximised at a minimum cost, whilst maximising societal benefit - when productive and allocative efficiency occurs at the same time.
What is technical efficiency?
How effectively a firm maximises production based on a limited number of inputs (labour, raw materials, etc). A firm is said to be technically efficient if it cannot produce more goods without increasing the number of inputs used in production.
Where is the point of productive efficiency on the short-run cost curve?
At the lowest point of the AC curve.
What is allocative efficiency?
When resources are distributed, in accordance to consumer preferences, meeting the needs and wants of society.
What is the point/formula of allocative efficiency?
P = MC
price = marginal cost
What is static efficiency?
When all resources are being used efficiently at a given point in time.
What is dynamic efficiency?
When all resources are allocated efficiently over time - the productive efficiency of a firm in the long-run.
What is x-inefficiency?
The inefficiency caused by a firm not minimising its average costs.
