ECON 208 Lecture Notes - Lecture 12: Economic Efficiency, Marginal Product, Production Function

• School: McGill University
• Department: Economics
• Course: ECON 208
• Professor: Eesha Sen Choudhury

Document Summary

In the long run, all inputs are variables. Firms strive for both technical efficient and economic efficiency: myeconlab - explaining concepts of efficiency. Technical efficiency: to produce any given level of output, cant use smaller quantity of one facto without using more of another. If you can reduce quantity of one without increasing quantity of the other - you aren"t being efficient: this focus on quantities of inputs ignored any difference in costs of inputs. Economic efficiency: for any given level of output, can"t produce it with a smaller (dollar) value of inputs: cant produce output at lower cost. *with any given set of factor prices, can be many technically efficient combinations of inputs but only one economically efficient combination. *switch level of inputs to change cost of production: mps set by production function. *same formula as utility --> but with utility you want to maximize and here you want to minimize.