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X-inefficiency is a concept used in economics to describe instances where firms go through internal inefficiency resulting in higher production costs than required for a given output. This inefficiency can result from various factors, such as outdated technology, inefficient production processes, poor management, and lack of competition, and it ...
Harvey Leibenstein (1922 – February 28, 1994) was a Ukrainian-born American economist.One of his most important contributions to economics was the concept of X-inefficiency and the critical minimum effort thesis in development economics.
The mainstream view is that market economies are generally believed to be closer to efficient than other known alternatives [4] and that government involvement is necessary at the macroeconomic level (via fiscal policy and monetary policy) to counteract the economic cycle – following Keynesian economics. At the microeconomic level there is ...
This type of inefficiency says that we could be organizing people or production processes more effectively. Often problems of "morale" or "bureaucratic inertia" cause X-inefficiency. Productive inefficiency, resource-market inefficiency, and X-inefficiency might be analyzed using data envelopment analysis and similar methods.
The diagram illustrates the working of a Pigouvian tax. A tax shifts the marginal private cost curve up by the amount of the externality. If the tax is placed on the quantity of emissions from the factory, the producers have an incentive to reduce output to the socially optimum level.
Modeling-wise, the non-negative cost-inefficiency component is added rather than subtracted in the stochastic specification. "Profit frontier analysis" examines the case where producers are treated as profit-maximizers (both output and inputs should be decided by the firm) and not as cost-minimizers, (where level of output is considered as ...
In economics, the concept of returns to scale arises in the context of a firm's production function.It explains the long-run linkage of increase in output (production) relative to associated increases in the inputs (factors of production).
Imperfect competition usually describes behaviour of suppliers in a market, such that the level of competition between sellers is below the level of competition in perfectly competitive market conditions. [2] The competitive structure of a market can significantly impact the financial performance and conduct of the firms competing within it.