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A market that is achieving allocative efficiency also is assumed to be achieving productive efficiency.
Allocative Efficiency
A state of the economy in which production represents consumer preferences; every good or service is produced up to the point where the last unit provides a marginal benefit equal to its marginal cost of production.
Productive Efficiency
A situation in which an economy or entity can no longer produce additional amounts of a good without lowering the production level of another product.
- Understand market efficiency, including allocative and productive efficiencies, and the conditions under which they are achieved.
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Learning Objectives
- Understand market efficiency, including allocative and productive efficiencies, and the conditions under which they are achieved.
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