Final answer:
X-inefficiency occurs when a firm operates at a higher cost than the lowest cost for a particular level of output.
Step-by-step explanation:
X-inefficiency occurs when a firm operates at a cost that is higher than the lowest cost for a particular level of output.
For example, if a firm is not using its resources efficiently and is experiencing inefficiencies in its operations, it will incur higher costs of production. This can be due to factors such as excessive administrative or labor costs, inefficient production processes, or outdated technology.
As a result, the firm will have a higher cost of production compared to other firms that are operating at the lowest cost for the same level of output, leading to X-inefficiency.