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Economic efficiencies (Dynamic (Dynamic efficiency is a situation where it…
Economic efficiencies
Dynamic
Dynamic efficiency is a situation where it is impossible to make one generation better off without making any other generation worse off.
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Allocative
Definition:
This occurs when there is an optimal distribution of goods and services, taking into account consumer’s preferences.
This is where price equals the Marginal Cost (MC) of production
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Productive
MC=AC
Productive Efficiency allows the firms to produce its products at the lowest possible average cost, which is good for the firms. Firms will minimise their costs, potentially being able to generate more profit
Draw and upload different market structure diagrams and explain whether this structure is productively efficient and if it isn't, indicate on the diagram where productive efficiency would be.
Provide a real world example of a market that is productively efficient here by linking an article and explaining why.
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Operating at the lowest average cost results in consumers possibly benefiting from lower prices, thus increasing their producer surplus.
X
X Efficiency - degree of efficiency maintained by individuals and firms under the conditions of imperfect competition.
X Inefficiency - happens when a lack of effective/real competition in a market or industry means that average costs are higher than they would be with competition
Higher employability opportunities, because the company employs too many workers, thus there are more jobs for the consumers.
Stakeholders within the firm are able to extract benefits that are greater than the firm needs to pay - directors and managers might pay themselves and take bonuses in excess of what is needed to keep them employed in the firm.
Trade Unions might be able to negotiate higher rates of pay than the market wage rate
The firm doesn't demand cheapest possible price for its supplies, meaning suppliers can earn higher profits.
Draw and upload different market structure diagrams and explain whether this structure is x efficient and if it isn't, indicate on the diagram where x efficiency/inefficiency would [be
Provide a real world example of a market that is x efficient/inefficient here by linking an article and explaining why.
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