Economics • Economic BasicsHard
Which of the following describes the condition of 'X-Inefficiency' introduced by Harvey Leibenstein in microeconomics?
A. Allocative inefficiency caused by monopoly pricing above marginal cost
B. Failure to realize maximum potential output from a given set of inputs due to lack of competitive pressure✓ Correct Answer
C. Deadweight loss resulting from external environmental pollution
D. Loss of consumer surplus due to government tariff impositions
💡 Solution & Explanation
X-inefficiency denotes the suboptimal utilization of productive inputs and organizational slack that occurs when firms operate without rigorous market competition, as first conceptualized by economist Harvey Leibenstein. Allocative inefficiency relates strictly to pricing distortions where market prices diverge from marginal cost, distinguishing it from internal managerial slack.
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