LOS c: Differentiate between technological efficiency and economic efficiency and calculate economic efficiency of various companies under different scenarios.
Ken Brobeck and Alice Magnuson are discussing the use of technology in production. They state the following:
Brobeck: If a firm has an opportunity to increase both its output and revenue by adopting new technology, it should do so.
Magnuson: If a production process is economically efficient, it must also be technologically efficient.
With respect to these statements:
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A) |
only Brobeck is incorrect. | |
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C) |
only Magnuson is incorrect. | |
Brobeck is incorrect. A firm must incur costs to employ new technology. The firm should do so only if the additional revenue from adopting the technology is greater than the increase in costs.
Magnuson is correct. A production process is technologically efficient if there is no process that uses less of one input without using more of another input to produce a particular level of output. A process is economically efficient if it produces a given output at the lowest possible cost. A process cannot be economically efficient unless it is technologically efficient.
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发表于 2010-4-16 22:04
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