3.4.1 Efficiency

Cards (5)

Allocative Efficiency 
Production is at MC=AR so social welfare is maximised
Productive Efficiency 
Where MC=AC is where costs are minimised
X-efficiency 
A firm is incentivised to lower costs whilst producing the greatest output possible
X-inefficiency 
When a firm has no incentives to lower costs so operates above its AC
Dynamic Efficiency 
Firms investing and innovating to reduce LRAC and earn more profit to reinvest