CAIE A-Level Economics 7.3.4 Dynamic Efficiency

CAIE A-Level Economics 7.3.4 Dynamic Efficiency
Cambridge International AS & A Level Economics 9708 syllabus for exams in 2026, 2027 and 20282026–2028

Practise identifying dynamic efficiency as innovation or investment that lowers future long-run average cost and linking retained profit, research and technology to that shift.

How this is tested

  • identify dynamic efficiency from a downward shift, not movement along, the LRAC curve
  • link retained profits, research or new technology to innovation and lower future unit costs
  • explain how larger dividends or weaker reinvestment can reduce dynamic efficiency over time

Question 8

[Maximum number: 1]

How is dynamic efficiency represented on a diagram?

A

a downward move to the minimum point of a long-run average cost curve

B

a downward shift in the long-run average cost curve

C

a move from a point inside a production possibility curve to a point on it

D

a reduction in marginal revenue so that it equals long-run marginal cost