Session 4: Economics: Microeconomic Analysis
Reading 16: Organizing Production
LOS c: Differentiate between technological efficiency and economic efficiency and calculate economic efficiency of various firms under different scenarios.
Three companies produce an identical unit of output by using three different processes. These processes require the following inputs of labor, energy, and materials:
| Company |
Labor, hours |
Energy, units |
Materials, units |
| Horatio Co. |
1 |
5 |
10 |
| Polonius Co. |
5 |
10 |
1 |
| Fortinbras Co. |
10 |
1 |
5 |
In 20X1, the wage rate for labor is $20 per hour, energy costs are $10 per unit, and material costs are $5 per unit. In 20X2, the wage rate for labor remains at $20 per hour, energy costs decrease to $5 per unit, and material costs increase to $15 per unit. The economically efficient producer in each year is:
|
A) |
Horatio Company in 20X1 and Polonius Company in 20X2. | |
|
B) |
Horatio Company in 20X1 and Fortinbras Company in 20X2. | |
|
C) |
Polonius Company in 20X1 and Fortinbras Company in 20X2. | |
Horatio Company is the economically efficient producer in 20X1 because it has the lowest cost per unit of output:
Horatio: (1 × $20) + (5 × $10) + (10 × $5) = $120 per unit of output
Polonius: (5 × $20) + (10 × $10) + (1 × $5) = $205 per unit of output
Fortinbras: (10 × $20) + (1 × $10) + (5 × $5) = $235 per unit of output
In 20X2, as a result of changes in the input prices, Polonius Company is the economically efficient producer:
Horatio: (1 × $20) + (5 × $5) + (10 × $15) = $195 per unit of output
Polonius: (5 × $20) + (10 × $5) + (1 × $15) = $165 per unit of output
Fortinbras: (10 × $20) + (1 × $5) + (5 × $15) = $280 per unit of output
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发表于 2011-3-6 15:48
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