Firm A can produce a unit of output with 10 hours of labor and 5 units of material. Firm B can produce a unit of output with 5 hours of labor and 10 units of material. Firm C can produce a unit of output with 10 hours of labor and 10 units of material. If the prices of labor and material are $10 per hour and $5 per unit, respectively, which of these firms is the most technologically efficient?
A) firm A only
B) firm B only
C) firm C only
D) Firms A and B could both be technologically efficient.

Question

Quizplus · Accepted Answer

Technological efficiency refers to using the least amount of inputs to produce a given level of output. Firm A uses 10 hours of labor and 5 units of material, costing $125. Firm B uses 5 hours of labor and 10 units of material, costing $100. Firm C uses 10 hours of labor and 10 units of material, costing $150. Firm B is the most cost-efficient, but both Firms A and B could be considered technologically efficient depending on the context of input usage.

Firm a Can Produce a Unit of Output with 10