All efficiencies

Question 1

Where is the Allocatively Efficient point?

Answer 1

MC = AR

Question 2

Where is the Profit Maximising Point?

Answer 2

MC = MR

Question 3

Where is the Productively Efficient point?

Answer 3

The bottom of the AC curve

When MC = AC (as it always crosses bottom)

Question 4

What is X-inefficacy?

Answer 4

When firms produce at an AC above their Average costs curve

(check book for example if lost)

Question 5

What is Dynamic Efficiency?

Answer 5

Re-investment of Supernormal profit

e.g factory expansion, innovating tech

Question 6

Name the Static efficiencies (3):

Answer 6

Allocative Efficiency
Productive Efficiency
X-Efficiency

Question 7

Why the Hell would a profit-max firm be X-inefficient?

Answer 7

1. Lack of comp BUT they would probably still want more profit and reduce costs
2. VERY DIFFICULT (could be in form of employee perks, free food etc..) very unpopular to remove, most people will not do it

Twitter was super X-inefficent before Elon

Question 8

Why the Hell would a profit-max firm be productively inefficient?

Answer 8

If they produce at the Productively efficient point they may be producing at a point which is not maximising their profit

firms will always produce at a point MC = MR if profit max is main objective