Why should economically efficient production process be technologically efficient? I know EEPP is determined using cost and TEPP is determined using no of inputs. Can't there be a scenario where number of inputs is actually more for a PP but cost is less? Let's say, per hour, cost of the Machine(M) is $3200 and cost for labor(L) is $32. Let's say PP1 uses 1L and 1M, PP2 only uses 5L. PP2 is economically efficient as it uses cost of $160 but PP1 is technologically efficient. Here PP2 is not actually technologically efficient but it is economically efficient. Is there anything wrong with my understanding? |