Question

If a firm chooses to produce 100 units of output for $150 with 10 units of labor and 12 units of capital, when they could produce the same 100 units for $120 with 10 units of labor and 8 units of capital, the firm is technologically ____________ and economically ______________.
A) inefficient; inefficientB) efficient; inefficientC) inefficient; efficientD) efficient; efficient.

Answer 1

Answer:

The correct answer is A)The firm is technologically inefficient and also economically inefficient

Explanation:

It is technologically inefficient because it is using 12 units of capital to produce 100 units of output, when it could only use 8 units of capital to produce the same output. In other words, it is using more capital than it has to, and that is a sign of technological inefficiency.

It is also economically inefficient because it is pouring more money ($150) to produce output, than it has to ($120).