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Economics: Microeconomic Analysis - Reading 16: Organizing P

Q1. 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:

A)   both are incorrect.

B)   only Magnuson is incorrect.

C)   only Brobeck is incorrect.

Q2. Technological and economic efficiency are most accurately described by which of the following statements?

A)   For a given level of output, technological efficiency uses the least amount of inputs whereas economic efficiency has lowest possible cost.

B)   For a given level of output, technological efficiency uses the least labor and economic efficiency uses the least capital.

C)   In order for an activity to be technologically efficient, it must be economically efficient.

答案和详解如下:

Q1. 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:

A)   both are incorrect.

B)   only Magnuson is incorrect.

C)   only Brobeck is incorrect.

Correct answer is C)

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.

Q2. Technological and economic efficiency are most accurately described by which of the following statements?

A)   For a given level of output, technological efficiency uses the least amount of inputs whereas economic efficiency has lowest possible cost.

B)   For a given level of output, technological efficiency uses the least labor and economic efficiency uses the least capital.

C)   In order for an activity to be technologically efficient, it must be economically efficient.

Correct answer is A)

Technological efficiency exists when the least amounts of possible inputs are used to produce a given level of output. Economic efficiency is producing a given output at the lowest possible cost.

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