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Contemporary Microeconomic Management Objectives of Government Microeconomic Policy In this subtopic the rationale for government involvement in setting microeconomic policy is examined The interaction between microeconomic performance and Australias economic performance in global terms is reviewed and the concepts of economic efficiency are revisited Since the early 1980s Government microeconomic policy has been directed towards establishing an environment or a framework within the economy which is likely to result in competitive outcomes Why is competition so desirable What are the benefits of competition that Governments in recent years have been so intent on delivering Being competitive means being able to produce goods and services that customers want at a price and quality at least as good as producers in other countries By being competitive and improving productivity the ability to produce more output with the same or less amounts of input a country such as Australia can achieve economic growth and improve the living standards of it population Economic efficiency is an important concept in assessing the level of competition in the economy There are three measures of efficiency productive or technical allocative and dynamic efficiency Productive or technical efficiency is the ability of firms to use the minimum inputs to achieve a particular level of output This obviously requires choosing the appropriate level of technology and machinery good management practices and work procedures and elimination of wastage Allocative efficiency is achieved when firms produce the mix of goods or services most desired by consumers That is resources are allocated to industries and firms in accordance with how much consumers want the output they produce Firms can achieve allocative efficiency by producing up to the point that price is equal to the cost of producing the last unit of the good Dynamic efficiency is having organisational structures that can ensure that efficiency is achieved over time That is technological improvements are adopted and innovations made that ensure that firms and industries
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