T3 EFFICIENCY

Question 1

What are the 4 types of efficiency

Answer 1

X efficiency, Dynamic efficiency, Allocative efficiency and productive efficiency.

Question 2

What is productive efficiency

Answer 2

Where Average cost is lowest
MC = AC
implies maximum output from given inputs, minimal waste of resources

Question 3

What is meant by allocative efficiency

Answer 3

Where welfare is maximised.

and occurs when resources are distributed to produce the goods and services most wanted to society

Where MC = Price and where MC = AR

Question 4

What is meant by x ineffeciency

Answer 4

X-inefficiency is when a firm is producing above its average cost curve for a given level of output.

Question 5

What is meant by dynamic efficiency

Answer 5

changing technology improves a firms output potential over time.

Question 6

Firms can only be dynamically efficient if they are making

Answer 6

supernormal profit

Question 7

what is static efficiency

Answer 7

Combination of productive and allocative efficiency

Price = MC / AR = MC

and Firms produce at lowest point AC curve

Question 8

Which efficiencies does a firm in perfect competition achieve

Answer 8

Allocatively and productively efficient in long run

Question 9

Which efficiencies does a Monopoly achieve

Answer 9

Likely to be dynamically efficeicny but x inefficient

Question 10

what does the efficiency of a firm in an oligopoly depend on

Answer 10

The degree of competition

Question 11

Which efficiencies do contestable markets achieve

Answer 11

Tend to be allocatively and productively efficient, due to threat of entry.