Productive efficiency
Definition. Productive efficiency occurs when output is produced at the lowest possible average cost, using the least costly combination of resources, so that no more of one good can be produced without producing less of another. For a firm it means producing at the lowest point of its average cost curve.
In perfect competition, firms achieve productive efficiency in the long run because competition and free entry force them to produce at minimum average cost. It is shown by production on the production possibility curve.
This term belongs to Perfect Competition in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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