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March 23, 2019 

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COMMAND ECONOMY: An economy in which the government uses its coercive powers (such as command and control) to answer the three questions of allocation. This is the real world version of the idealized theoretical pure command economy. While in this real world version some allocation decisions are undertaken by markets, the vast majority are made through central planning. The two most notable command economies of the 20th century were the communist/socialist economic systems of China and the Soviet Union.

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TECHNICAL EFFICIENCY:

Obtaining the greatest possible production of goods and services from available resources. In other words, resources are not wasted in the production process. This is also considered as engineering efficiency and should be contrasted with economic or allocative efficiency.
Technical efficiency means that natural resources are transformed into goods and services without waste, that producers are doing the best job possible of combining resources to make goods and services. There is no waste of material inputs. There are no workers standing idly around waiting for spare parts. The maximum amount of physical production is obtained from the given resource inputs. In essence, production is achieved at the lowest possible opportunity cost.

Technical efficiency is a prerequisite for allocative or economic efficiency. Economic efficiency is achieved if the highest possible level of satisfaction is obtained from given resources. Because satisfaction is derived from consuming goods and services, economic efficiency requires the greatest possible level of production, that is, technical efficiency.

However, while technical efficiency is necessary for economic efficiency, it does not guarantee economic efficiency. While technical efficiency might be achieved in the production of purple spotted stuffed animals, allocative efficiency is not achieved if no one actually wants purple spotted stuffed animals and they remain stored in a big purple warehouse.

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Recommended Citation:

TECHNICAL EFFICIENCY, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2019. [Accessed: March 23, 2019].


Check Out These Related Terms...

     | production possibilities | technology | production | efficiency | economic efficiency | consumer sovereignty | satisfaction | full employment | opportunity cost |


Or For A Little Background...

     | good | service | allocation | resource allocation | scarcity | limited resources | unlimited wants and needs | economic goals | factors of production | economic thinking |


And For Further Study...

     | distribution standards | economic system | seven economic rules | three questions of allocation |


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