One in which resource allocation is guided by market forces without intervention of the state
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Productive efficiency
Attaoned when a firm operates at minimum average cost, choosing an appropriate combination of inputs (cost efficiency) and producing the maximum output possible from those inputs (technical efficiency)
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Allocative efficiency
Achieved when customer satisfaction is maximised
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Economic efficiency
A situation which both productove efficiency and allocative efficiency has been reached
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Pareto optimum
An allocation of resources is said to be pareto optimum is no reallocation of resources can make an individual better of without another individual being worse off
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Total cost (TC)
The sum of all costs incurred from producing a given level of output
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Average Total Cost (ATC)
Total cost / quantity produced
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Marginal Cost (MC)
The cost of producing an additional unit of output`
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Fixed Cost
Costs incurred that do not vary with the level of output
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Sunk Costs
Cost incurred by a firm that cannot be recovered if the firm ceases trading
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Variable Costs
Costs that do vary with the level of output
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Economies of Scale
Occur for a firm when an increase in the scale factor of production leads to production at a lower long-run average cost
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Internal economies of scale
Economies of scale arise from the expansion of a firm
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External economies of scale
Economies of scale arise from the expansion of the industry on which the firm is operating
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Internal diseconomies of scale
Diseconomies of scale arise from the expansion of a firm
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External diseconomies of scale
Diseconomies of scale arise from the expansion of the industry on which the firm is operating
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Technical efficiency
Attaining the maximum possible output from a given set of inputs
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Cost efficiency
The appropriate combination of inputs of factors of production, given the relative price of those factors
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Other cards in this set
Card 2
Front
Attaoned when a firm operates at minimum average cost, choosing an appropriate combination of inputs (cost efficiency) and producing the maximum output possible from those inputs (technical efficiency)
Back
Productive efficiency
Card 3
Front
Achieved when customer satisfaction is maximised
Back
Card 4
Front
A situation which both productove efficiency and allocative efficiency has been reached
Back
Card 5
Front
An allocation of resources is said to be pareto optimum is no reallocation of resources can make an individual better of without another individual being worse off
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