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Updated: Aug 20, 2021

Failure of a firm or other organization to get the maximum possible output from the inputs it uses, or to produce its output with the minimum use of inputs. X-inefficiency implies that there is slack organization. Its existence can be shown in two possible ways. One is the engineer’s method, producing a plan of operations which is expected to do better. The other is the statistician’s or benchmark approach, showing that other firms or organizations manage to get more output from equal inputs, or the same output from fewer inputs.

Reference: Oxford Press Dictonary of Economics, 5th edt.

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James is a lead content editor for Invezz. He's an avid trader and golfer, who spends an inordinate amount of time watching Leicester City and the… read more.