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Even a technically efficient firm may not be
productively efficient. Productive efficiency means producing that quantity of output at which ATC is minimized.
As we can see on the graph to the right, if the firm produces any level of output other than QPE, average costs will be greater. The quantity QPE is the amount which this production technology was designed to produce so productive efficiency is the same as producing at designed plant capacity. At Q<PE the firm is producing below designed capacity (it has excess capacity) while at Q>PE the firm is producing above designed capacity.
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