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February 27, 2024 

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PLANT: The physical capital (building and equipment) at a particular location used for the production of goods and services. While the term plant is occasional used synonymously with the terms firm or business, when economists get down to specifics, which they are prone to do, the term plant is used ONLY for a specific production facility. As such, it best used synonymously with the term factory.

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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, 2000-2024. [Accessed: February 27, 2024].


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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