Productive efficiency Totally Explained

Everything about Productive Efficiency totally explained

Productive efficiency occurs when the economy is operating at its production possibility frontier (PPF). This takes place when production of one good is achieved at the lowest cost possible, given the production of the other good(s). Equivalently, it's when the highest possible output of one good is produced, given the production level of the other good(s). In long-run equilibrium for perfectly competitive markets, this is where average cost is at the lowest point on the Average Cost curve. Due to the nature of monopolistic companies, that'll choose to produce at profit maximising levels (where MC=MR) and therefore won't be productively efficient as the lowest average cost wouldn't produce enough profit for the company..

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