Productive efficiency
Productive efficiency occurs when a firm produces at the minimum point of its average total cost curve, producing the maximum output from given inputs or the minimum cost for given output level.
Real World
Aldi and Lidl achieve productive efficiency through no-frills store layouts, limited product ranges, and pallet-based displays, keeping average costs at the minimum point and undercutting traditional supermarkets on price.
Exam Focus
Productive efficiency means producing at the minimum of the AC curve — do not confuse it with allocative efficiency (P = MC).
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