Economic efficiency is the using of resources in such a way as to maximize the production of goods and services. The system can be known to be economically efficient if:
- No one can be made better off without making someone else worse off.
- More output cannot be obtained without increasing the amount of inputs.
- Production proceeds at the lowest possible per-unit cost.
- A type of efficiency that results if the monetary value of society's resources are maximized.
- Has a less stringent criteria and is hence applicable to more circumstances.
- Under Kaldor-Hicks efficiency, an outcome is considered more efficient if a Pareto optimal outcome can be reached by arranging some compensation from those that are made better off to those that are made worse off.
- This is achieved if the marginal willingness to pay by those who benefit from an action is equal to the marginal willingness to accept of those harmed
- One of two noted efficiency criteria used in economics. The other is Pareto efficiency.
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