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.) 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. 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". 3. Economic efficiency - key concept summary. Workers are well-paid. Productivity. Productive Efficiency. Efficiency. When scarce resources are allocated according to consumer preferences at a price equal to marginal cost . 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. Start studying 3.1 Food supply, Plant growth and Productivity. Penguin Ski Club of New Hampshire. Productive efficiency similarly means that an entity is operating at maximum capacity. 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). 2. This is because firms produce at the lowest point on the AC. X efficiency. The mix of goods produced and their distribution to consumers maximizes customer satisfaction. I. Located in Lincoln NH near Loon Mountain. Productive efficiency is closely related to the concept of technical efficiency. could not produce any more of one good without sacrificing production of another good and without improving the production technology. Allocative efficiency occurs where P = MC. The study of economics does not presume to tell a society what choice it should make along its production possibilities frontier. In a market-oriented economy with a democratic government, the choice will involve a mixture of decisions by individuals, firms, and government. Learn vocabulary, terms, and more with flashcards, games, and other study tools. Efficiency. Efficiency is a measure of how well you do those things. When a firm is operating at the lowest point of their average cost curve in the short or the long run. Dynamic efficiency Productive efficiency and short-run average cost curve. Productive efficiency . Production efficiency may also be referred to as productive efficiency. All available resources are employed in production. 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. 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