Turn on thread page Beta

Confused on dynamic efficiency.. watch

Announcements
    • Thread Starter
    Offline

    9
    ReputationRep:
    Is dynamic efficiency when productive efficiency increases? Or is when profit can go towards innovation etc. OR is it both??
    And if it's when productive efficiency increases over time, then how is dynamic efficiency an advantage of monopolies since they aren't productively efficient anyway?
    Offline

    10
    ReputationRep:
    Dynamic efficiency is when firms (which are producing at super-normal profit [also known as abnormal profit]) reinvest to improve productivity in the long run through innovation in terms of production technology.

    This is an advantage of monopolies as they normally produce at large super-normal profits, unless they are trying to appear as if they're in a contestable market. With this super-normal profit they can then invest this to improve production methods and so in the long run potentially be more productively efficient.

    There is an extra incentive for firms of monopoly power to do this as they are the only producer in the market and so innovation in such market only benefits them.
 
 
 
Reply
Submit reply
Turn on thread page Beta
Updated: February 4, 2018

University open days

  1. Norwich University of the Arts
    Undergraduate Open Days Undergraduate
    Fri, 28 Sep '18
  2. Edge Hill University
    Faculty of Health and Social Care Undergraduate
    Sat, 29 Sep '18
  3. Birmingham City University
    General Open Day Undergraduate
    Sat, 29 Sep '18
Poll
Which accompaniment is best?

The Student Room, Get Revising and Marked by Teachers are trading names of The Student Room Group Ltd.

Register Number: 04666380 (England and Wales), VAT No. 806 8067 22 Registered Office: International House, Queens Road, Brighton, BN1 3XE

Write a reply...
Reply
Hide
Reputation gems: You get these gems as you gain rep from other members for making good contributions and giving helpful advice.