Economics Efficiency Quiz

What is allocative efficiency?

• When a firm achieves the lowest possible average cost

• When a firm reinvests supernormal profits

• When a firm operates without waste

• When resources are allocated to maximize consumer satisfaction

At what point does productive efficiency occur?

• When a firm is operating on the average cost curve

• When demand equals supply

• At the minimum point of a firm’s average cost curve

• When a firm achieves supernormal profits

What is dynamic efficiency?

• When a firm operates without waste

• When a firm achieves the lowest possible average cost

• When a firm reinvests supernormal profits to increase efficiency

• When resources are allocated to maximize consumer satisfaction

What causes X-inefficiency?

• Allocating resources to maximize consumer satisfaction

• Being wasteful, resulting in higher average costs

• Reinvesting supernormal profits

• Operating at the minimum point of the average cost curve

What is a characteristic of technical efficiency?

• Allocating resources to maximize consumer satisfaction

• Achieving the lowest possible average cost

• Operating at a point not on the average cost curve

• Reinvesting supernormal profits

Which of the following is NOT a type of efficiency discussed?

• Operational efficiency

• Allocative efficiency

• Productive efficiency

• Dynamic efficiency

What is the result of a firm being X-inefficient?

• Higher average costs

• Maximized consumer satisfaction

• Reinvestment of profits

• Lower average costs

Why might a monopoly be X-inefficient?

• Because they reinvest supernormal profits

• Because of the lack of competition and profit motive

• Due to operating at the minimum efficient scale

• Due to high competition forcing lower prices