What does efficiency mean in economics?

In economics, efficiency means it is impossible to improve the situation of one party without imposing a cost on another. Conversely, if a situation is inefficient, it becomes possible to benefit at least one party without imposing costs on others. The meaning of efficiency can become even more specific than that, though!

What are the three types of efficiency?

Efficiency is concerned with the optimal production and distribution of scarce resources. Productive – producing for the lowest cost. Dynamic – Efficiency over time. X-efficiency – incentives to cut costs. Efficiency of scale – taking advantage of economies of scale. Social efficiency – taking into account external costs/benefits. 1.

What is productive efficiency?

Productive efficiency means producing without waste so that the choice is on the production possibility frontier. In the long run in a perfectly competitive market—because of the process of entry and exit—the price in the market is equal to the minimum of the long-run average cost curve.