Efficiency

• Productive Efficiency 


  When a firm is producing at its lowest cost

  MC = AC

  
• Allocative Efficiency 


  When welfare is maximised

  MC = AR

  
• Dynamic Efficiency 


  Dynamic efficiency is how changing technology improves a firm's output potential over time
• X - Inefficiency 


  When a firm is producing above its average cost curve for a given level of output.