Economics (AS & A Level) · May / June 2021 · Paper 31 · Question 2

A firm produced its goods at an average cost of $14. It then produces the same output at a lower average cost by different methods of production. The price remains above the marginal cost. In which ways is this firm now more efficient?

1. Aallocative efficiency: no; dynamic efficiency: no
2. Ballocative efficiency: no; dynamic efficiency: yes
3. Callocative efficiency: yes; dynamic efficiency: no
4. Dallocative efficiency: yes; dynamic efficiency: yes

As printed in the paper