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Allocative efficiency is a state of the economy in which production is aligned with the preferences of consumers and producers; in particular, the set of outputs is chosen so as to maximize the social welfare of society. [1] This is achieved if every produced good or service has a marginal benefit equal to the marginal cost of production.
An equilibrium may be productively efficient without being allocatively efficient — i.e. it may result in a distribution of goods where social welfare is not maximized (bearing in mind that social welfare is a nebulous objective function subject to political controversy).
Productive efficiency: no additional output of one good can be obtained without decreasing the output of another good, and production proceeds at the lowest possible average total cost. These definitions are not equivalent: a market or other economic system may be allocatively but not productively efficient, or productively but not allocatively ...
In the short-run, perfectly competitive markets are not necessarily productively efficient, as output will not always occur where marginal cost is equal to average cost (MC = AC). However, in the long-run, productive efficiency occurs as new firms enter the industry. Competition reduces price and cost to the minimum of the long run average costs.
Trump's plan to 'drill. baby, drill' isn't likely to spark more oil production, lower gasoline prices, and help reverse inflation, analysts say.
An equilibrium in this sense either relates to an exchange economy only or presupposes that firms are allocatively and productively efficient, which can be shown to follow from perfectly competitive factor and production markets. [38]
As of Thursday, consensus expects the US economy to grow at an annualized rate of 2.1%, per Bloomberg data. Bannister is more bearish: He sees GDP falling to about 1.5% in the second half of the ...
Shelter, food remain sticky. Notable callouts from the inflation print include the shelter index, which rose 4.9% on an unadjusted, annual basis, matching September's increase.