There are two concepts of Efficiency - Technological Efficiency (TE) and Economic Efficiency (EE). Technological Efficiency occurs when it is not possible to increase output without increasing inputs. Economic Efficiency occurs when the cost of producing a given output is as low as possible. TE is an engineering matter; EE depends on the prices of productive resources. Suppose there are 4 different methods for making TV sets - a) Robot production: One person monitors the entire computer driven process b) Production Line: Workers specialize in a small part of the job as the emerging TV set passes them on a production line. c) Bench Production: Workers specialize in a small part of the job but walk from bench to bench to perform their tasks. d) Hand-tool production: A single worker crafts the whole TV set with a few hand-tools.
There are two concepts of Efficiency - Technological Efficiency (TE) and Economic Efficiency (EE). Technological Efficiency occurs when it is not possible to increase output without increasing inputs. Economic Efficiency occurs when the cost of producing a given output is as low as possible. TE is an engineering matter; EE depends on the prices of productive resources. Suppose there are 4 different methods for making TV sets - a) Robot production: One person monitors the entire computer driven process b) Production Line: Workers specialize in a small part of the job as the emerging TV set passes them on a production line. c) Bench Production: Workers specialize in a small part of the job but walk from bench to bench to perform their tasks. d) Hand-tool production: A single worker crafts the whole TV set with a few hand-tools.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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