A Level Economics AQA Practice Exam

What is static efficiency?

1. The efficiency of a firm's production over time

2. The optimal combination of resources at a single point in time

3. The ability to maximize profits indefinitely

4. The cost-effectiveness of a firm’s long-term strategy

The correct answer is: The optimal combination of resources at a single point in time

Static efficiency refers to the optimal allocation of resources at a specific point in time. It focuses on achieving an efficient production process where resources are utilized in such a way that maximizes output given the available technology and resources without considering any changes over time. This concept is crucial in understanding how firms can produce goods and services at the lowest possible cost while maximizing benefits, such as consumer satisfaction. In contrast, the other options do not accurately represent static efficiency. The concept of efficiency over time, embodied in some options, leans more towards dynamic efficiency, which involves changes and improvements over time. Meanwhile, the idea of maximizing profits indefinitely would relate to strategic planning rather than the immediate allocation of resources. Additionally, evaluating cost-effectiveness in a long-term strategy concerns broader operational effectiveness rather than the specific point of resource allocation that static efficiency focuses on. Thus, the definition of static efficiency as the optimal combination of resources at a single point in time aligns perfectly with the principles of efficiency in economics.