There are two ways for a production process to be technologically efficient.¹ One, a production process is technologically efficient if it yields the highest output possible for a given level of input. For example, if you build night stands and you get the greatest number of night stands as is possible from 200 board feet of mahogany then you are efficient in the production of night stands. Two, a production process is technologically efficient if it uses the minimum level of input to produce a given level of output. For example, if you build 10 night stands with the minimum amount of wood possible then you are technologically efficient in the production of night stands.

 Technological efficiency is measured by the ratio of units of output to units of input:

Referring to this formula and the above discussion, technological efficiency increases whenever the units of output increase or the units of input decrease. A production process is technologically efficient whenever this measurement is as large as possible.

 Economic efficiency is defined as the ratio of the value of output to the value of input:

= {Price of Output / Price of Input} X Measurement of Technological Efficiency.

 A production process is economically efficient if producers minimize their input costs and maximize their output price for a given level of output.

1. It takes 4 hours of labor to build to build 20 oak clocks. What is the technological efficiency of labor?

a) .2

b) 2

 c) 4

d) 5

2. If the labor rate is $5.00 / hour and oak clocks sell for $30.00, what is the economic efficiency of labor in building clocks?

a) 5

b) 20

c) 30

d) 35

3. If the technological efficiency of labor in building purple heart boxes is .10, how many boxes could be built with 20 hours of labor?

a) 1

b) 2

 c) 3

d) 4

4. If the technological efficiency of labor in building purple heart boxes is .10, how many hours would it take to build 5 boxes?

a) 5

b) 10

c) 25

d) 50

5. If the labor rate is $7.00 / hour and purple heart boxes sell for $70.00, what is the economic efficiency of labor in building boxes?

a) 1

b) 2

c) 3

d) 4

6. If the technological efficiency of labor in building cedar bird houses is 24, how many bird houses can be produced with 2 hours of labor?

a) 24

b) 36

c) 40

d) 48

7. If the technological efficiency of labor in building cedar bird houses is 24, how many hours of labor does it take to build 72 bird houses?

a) .33

b) 2

c) 3

d) 4

8. If the technological efficiency of labor in building cedar bird houses is 24, the economic efficiency is 18, and the labor rate is $6.00, what is the price of bird houses?

a) $2.00

b) $4.00

c) $4.50

d) $5.00

9. If the technological efficiency of labor in building cedar bird houses is 24, the economic efficiency is 18, and the price of cedar bird houses is $6.00, what is the labor rate per hour?

a) $2.00

b) $4.00

c) $6.00

d) $8.00