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Definition of 'Economic Efficiency'
A broad term that implies an economic state in which every resource is optimally allocated to serve each person in the best way while minimizing waste and inefficiency. When an economy is economically efficient, any changes made to assist one person would harm another. In terms of production, goods are produced at their lowest possible cost, as are the variable inputs of production.
Some terms that encompass phases of economic efficiency include allocational efficiency, production efficiency and Pareto efficiency.
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