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Lecture 13

Lecture Thirteen: Technology and Economic Efficiency

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Department
Economics
Course
ECON 1000
Professor
George Georgopoulos
Semester
Fall

Description
Lecture Thirteen: Technology and Economic Efficiency November 10, 2011 Technological Efficiency Technological efficiency occurs when a firm products a given level of output by using the least amount of inputs. There may be different combinations of inputs that are all technologically efficient, but there is always one that is more so than the others (because it is also economically efficient). Economic Efficiency Economic efficiency occurs when the firm produces a given level of output at the least cost The economic efficiency method depends on the relative costs of capital and labour The difference is that technological efficiency concerns the quantity of inputs and economic efficiency concerns the price of the inputs. An economically efficient production process may be technologically efficient, but this is not always the case. It is possible to have one without the other. Practice Exam Questions and Answers 1. When are contests are a good job in resource allocation? When it is hard to track all the different stages leading up to the final goal, the final performance is all that is marked. “When the efforts of the players are hard to monitor and reward directly” 2. A used truck has a sticker price of $21 000. Arthur is willing to pay $19 500. He only pays $19 250. What is his consumer surplus? His consumer surplus is how much he is willing to pay minus what he actually paid, so 250. 3. The principle of increasing marginal cost means that “As the quantity of a good increases, the opportunity cost of the last unit produced increases” 4. The efficient quantity of a good i 30 unites per day. What is the producer surplus from the 100th good? The producer surplus is the price that they get minus the costs of producing the good. Therefore the producer surplus of the 100th unit is the marginal cost of prod
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