Efficiency Flashcards
What is the Marginal Cost?
The change in TC of making 1 more unit of output
What is Marginal Revenue?
The change in TR of making 1 more unit of output
what is the average cost?
Total cost/ output
what is average revenue?
Total revenue/ output
what is total profit
TR- TC
What is profit per unit
Average Revenue- average cost
What is allocative efficiency?
Producing that maximises satisfaction and match consumer preferences
What is productive efficiency?
Producing at the lowest cost as much as possible from available resources (more output for the same input)
What does economic efficiency rely on?
Profit signalling function
what are the problems with the free market mechanism for efficiency?
Monopolies, externalities and inequitable if uneven income distribution
why might there be no gains from productivity?
x-inefficiency, regulated industries and satisficing firms
how can you increase productivity?
Process innovation, quality of management and human capital (education)
what is market orientation?
market research that leads to allocative and productive efficiency through non-price competition.
