Economic efficiency is a situation where individuals and firms get maximum satisfaction or benefit from their scarce resources.
Economists have identified a number of different types of efficiency which include:
• allocative efficiency: which is achieved when the cost of producing a good is equal to the value consumers place on that good, which is reflected in the price they are willing to pay. It occurs when P = MC
• productive efficiency: which is achieved when production takes place at the lowest possible average cost. It occurs when AC are minimised
• pareto efficiency: which is achieved when it is impossible to make someone better off without making someone else worse off
• dynamic efficiency: which measures improvements in technical and productive efficiency over time
• other less commonly used definitions of efficiency such as technical efficiency.
marlinbito answered the question on July 5, 2018 at 18:30
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