Efficiency and Structure

Productive Efficiency

The level of production that makes the most cost effective use of the factors of production

Allocative Efficiency

The level of production where no resources are wasted, no one can be better off without anyone else being worse off

Perfectly competitive markets exhibit productive and allocative efficiency

Efficiency is influenced by a number of factors including:

Research and development investment in human and non-human capital

Technological change

The more competitive a market is, the greater the allocative efficiency of resources