3.4.1 - Efficiency

    Cards (11)

    • What does efficiency refer to in economics?
      Optimal use of resources to achieve the best possible outcome
    • What is allocative efficiency?
      Resources distributed to maximize consumer satisfaction
    • When does allocative efficiency occur?
      When price equals marginal cost
    • What is productive efficiency?
      Goods produced at the lowest possible cost
    • When does productive efficiency occur?
      At the lowest point of the average cost curve
    • What is dynamic efficiency?
      Efficiency over time through adopting new technologies
    • What is X-inefficiency?
      When a firm operates at higher costs than necessary
    • What often causes X-inefficiency?
      Lack of competition and incentive to minimize costs
    • What is market failure?
      Inefficient resource allocation leading to overproduction or underproduction
    • What are the types of economic efficiency?
      • Allocative efficiency
      • Productive efficiency
      • Dynamic efficiency
      • X-inefficiency
    • Why is understanding types of efficiency crucial?
      • Analyzing market performance
      • Addressing market failures