Production efficiency may also be referred to as productive efficiency. Learn vocabulary, terms, and more with flashcards, games, and other study tools. Knowing the difference between productivity and efficiency will help you understand the how the performance of the company is measured. In this case, the firm will be allocatively efficient because at Q1 P=MC. While efficiency is all about working smarter, to get more out of less, productivity nothing but increasing the overall yield, and this is possible by raising the performance level, to achieve greater results. This happens at Q1. Productive efficiency similarly means that an entity is operating at maximum capacity. Economic efficiency - key concept summary. When a firm is operating at the lowest point of their average cost curve in the short or the long run. Efficiency. Efficiency is a measure of how well you do those things. Allocative efficiency . could not produce any more of one good without sacrificing production of another good and without improving the production technology. Productive efficiency and short-run average cost curve. Menu and widgets IV. Productivity. Productive efficiency (or production efficiency) is a situation in which the economy or an economic system (e.g., a firm, a bank, a hospital, an industry, a country, etc.) 3. II. Efficiency. A firm is said to be productively efficient when it is producing at the lowest point on the short run average cost curve (this is the point where marginal cost meets average cost). This occurs on the lowest point of the AC curve. Productivity is generally regarded as a measure of outputs divided by inputs. Points on the PPF curve are the only ones that achieve "productive efficiency". Productive efficiency . 2. Dynamic efficiency Penguin Ski Club of New Hampshire. I. Allocative efficiency occurs where P = MC. Productive Efficiency. When scarce resources are allocated according to consumer preferences at a price equal to marginal cost . In a market-oriented economy with a democratic government, the choice will involve a mixture of decisions by individuals, firms, and government. All of the activities that you get done in a day may be considered your output and the time you put into them are your inputs. The mix of goods produced and their distribution to consumers maximizes customer satisfaction. The output of productive efficiency occurs when a business in a given market or industry reaches the lowest point of its average cost curve implying an efficient use of scarce resources and a high level of factor productivity. Productive efficiency is closely related to the concept of technical efficiency. The study of economics does not presume to tell a society what choice it should make along its production possibilities frontier. 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