Search results
Results from the WOW.Com Content Network
[3] [4] At this point the social surplus is maximized with no deadweight loss (the latter being the value society puts on that level of output produced minus the value of resources used to achieve that level). Allocative efficiency is the main tool of welfare analysis to measure the impact of markets and public policy upon society and subgroups ...
When drawing diagrams for businesses, allocative efficiency is satisfied if output is produced at the point where marginal cost is equal to average revenue. This is the case for the long-run equilibrium of perfect competition. Productive efficiency occurs when units of goods are being supplied at the lowest possible average total cost.
Perfect competition provides both allocative efficiency and productive efficiency: Such markets are allocatively efficient, as output will always occur where marginal cost is equal to average revenue i.e. price (MC = AR). In perfect competition, any profit-maximizing producer faces a market price equal to its marginal cost (P = MC).
in 1966, Harvard University Professor Harvey Leibenstein first introduced the concept of X-inefficiency in his paper "Allocative Efficiency vs. X- Efficiency", which was published in American Economic Review. X-Inefficiency refers to a firm's inability to fully utilize its resources, resulting in an output level that falls short of the maximum ...
In economics, a production function gives the technological relation between quantities of physical inputs and quantities of output of goods. The production function is one of the key concepts of mainstream neoclassical theories, used to define marginal product and to distinguish allocative efficiency, a key focus of economics. One important ...
Fama identified three levels of market efficiency: 1. Weak-form efficiency. Prices of the securities instantly and fully reflect all information of the past prices. This means future price movements cannot be predicted by using past prices, i.e past data on stock prices is of no use in predicting future stock price changes. 2. Semi-strong ...
Also called resource cost advantage. The ability of a party (whether an individual, firm, or country) to produce a greater quantity of a good, product, or service than competitors using the same amount of resources. absorption The total demand for all final marketed goods and services by all economic agents resident in an economy, regardless of the origin of the goods and services themselves ...
The term static efficiency belongs within neoclassical economics, which argues that explicit theoretical rationale of liberalisation is to achieve an efficient (static) allocation of resources. [1] In order to achieve this situation, there are three central assumptions within neoclassical economics that are indispensable for achieving an ...