Efficeincies

Question 1

What is productive efficiency

Answer 1

1. When goods/services are produced at lowest possible cost by utilising EOS
2. Production occurs at the lowest point of AC curve

Question 2

Allocative efficiency

Answer 2

When resources in am economy are used to produce goods/services that consumers want
When price = MC
Social welfare is maximised

Question 3

X inefficiency

Answer 3

When firms are not producing at lower costs
Happens in monopolies where there in no incentive to reduce cost

Question 4

What is dynamic inefficiency

Answer 4

When firms fail to innovate or improve over time
Due to lack of competetive pressure
Leading to slow progress or missed opportunities for growth