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Industry Policy - Efficiency
Technical Efficiency
No inputs are "wasted." This means that reducing any inputs will reduce output. If this weren't true then the firm would be paying for inputs which do nothing.
Productive Efficiency
The firm is operating at minimum average unit cost. In other words, a productively efficient firm is producing that level of output where the ATC curve is at its minimum.
Allocative Efficiency
Inputs are being used such that the marginal benefit of the last unit used is equal to the marginal cost of employing that same unit. As we will see, this means that the market price of the last unit produced must equal the marginal cost of production.

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