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In the single-price model, at the point of allocative efficiency price is equal to marginal cost. [3] [4] At this point the social surplus is maximized with no deadweight loss (the latter being the value society puts on that level of output produced minus the value of resources used to achieve that level). Allocative efficiency is the main tool ...
By doing so, it defines productive efficiency in the context of that production set: a point on the frontier indicates efficient use of the available inputs (such as points B, D and C in the graph), a point beneath the curve (such as A) indicates inefficiency, and a point beyond the curve (such as X) indicates impossibility.
When drawing diagrams for businesses, allocative efficiency is satisfied if output is produced at the point where marginal cost is equal to average revenue. This is the case for the long-run equilibrium of perfect competition. Productive efficiency occurs when units of goods are being supplied at the lowest possible average total cost.
Perfect competition provides both allocative efficiency and productive efficiency: Such markets are allocatively efficient, as output will always occur where marginal cost is equal to average revenue i.e. price (MC = AR).
Then in order to reposition society at the desired point α' it is not necessary for the government to redistribute resources in such a way that Octavio holds (α' x,α' y) and Abby holds the complement: it is sufficient to reallocate resources to take the economy to any point (say α) on the price line through α', and then leave the market to ...
An example PPF: points B, C and D are all productively efficient, but an economy at A would not be, because D involves more production of both goods. Point X cannot be achieved. Productive efficiency occurs under competitive equilibrium at the minimum of average total cost for each good, such as the one shown here.
Now in terms of the macro, if you recall, when we gave our initial outlook for 2024, we said 150 basis points to 250 basis points of OR improvement, but we were expecting higher volume contribution.
Being simply based on past stock returns that are functions of past prices (dividends can be ignored), the momentum effect produces strong evidence against weak-form market efficiency, and has been observed in the stock returns of most countries, in industry returns, and in national equity market indices.