X-Efficiency

Knowledge Center

What is X-Efficiency? Meaning.

X-Efficiency is an economic expression for the effectiveness with which an organization uses its given set of inputs to produce outputs. In a theoretical market with perfect competition, there will in general be no X-Inefficiency because if any firm is less efficient than the others it will not make sufficient profits to stay in business in the long term.

X-inefficiency is not the only type of inefficiency in economics. X-inefficiency only looks at the outputs that are produced with given inputs. It does not take account of whether the inputs are the best ones to be using, or whether the outputs are the best ones to be producing. This other last form is referred to as Allocative (Economic) Efficiency.

If a company is producing the maximum output it can given the resources it employs, such as men and machinery, and the best technology available, it is said to be X-Efficient. X-Inefficiency occurs when X-Efficiency is not achieved.

Economic theory assumes that the management of firms act to maximize owners' wealth by minimizing risk and maximizing economic profits -- which is accomplished by simultaneously maximizing revenues and minimizing costs, usually through the adjustment of output. In perfect competition, the free entry and exit of firms tends toward firms producing at the point where price equals long run average costs and long run average costs are minimized.

Forum Forum about X-Efficiency. Below you can ask a question about this topic, share your experiences, report a new development, or explain something. Start a new topic about X-Efficiency Share your knowledge here (or ask a question)   🔥 NEW How X-Efficiency Works and an Example X-Efficiency is an economic expression for the effectiveness of the effort of firms to produce the same output at a lower average cost. It is a form of technical efficiency achieved when less inputs a... 5   X-Efficiency versus Operational, Economic and Cost Efficiency What are the differences between X-Efficiency and Operational Efficiency, Economic Efficiency and cost Efficiency?... 3   History of Efficiency The principles of efficiency date back to 1776, when Adam Smith wrote his influential book 'An inquiry into the nature and causes of the wealth of nations'. In this book, Smith writes that productive ... 1   Efficiency or Effectiveness Efficiency is more important than effectiveness because without efficiency you cannot be effective.... 0   1 comments

Information Sources Various sources of information regarding X-Efficiency. Here you will find powerpoints, videos, news, etc. to use in your own lectures and workshops.

Research Links Jump to further research sources regarding X-Efficiency. News Videos Presentations   Books Academic More

Compare with: Value for Money Audit  |  Scientific Management (Taylorism)

Return to Management Hub: Finance & Investing  |  Strategy & Innovation  |  Supply Chain & Quality

More on Management  |  Return to Management Dictionary

This ends our X-Efficiency summary and forum.