Booklet 1, Productivity, Efficiency & DoL

Question 1

What is “production”?

Answer 1

Raw output

Question 2

What is “productivity”?

Answer 2

Output / units of input

Question 3

What is the formula for Productivity?

Answer 3

Total output per period of time / No. units of factors of production

Question 4

What is the formula for Labour Productivity?

Answer 4

Total output per period of time / No. units of labour (e.g. man hours)

Question 5

How can Labour Productivity be improved?

Answer 5

Training, specialisation, improved supervision

Question 6

What is Total Factor Productivity?

Answer 6

Average Productivity of all factors of production

Question 7

What is the formula for Total Factor Productivity?

Answer 7

Total output units / total input units

Question 8

What are the effects of higher productivity?

Answer 8

Lower avg. cost, improved international competitiveness, higher profits, higher wages, economic growth

Question 9

What is Technical Efficiency?

Answer 9

Max. output with given factors of production

Question 10

What is Productive Efficiency?

Answer 10

Technical Efficiency, and min. avg. Costs

Question 11

What is Allocative Efficiency?

Answer 11

A combination of outputs which maximises consumer utility

Question 12

What is the Pareto Optimum?

Answer 12

A point where every change has a trade-off. No output can improve without another deteriorating

Question 13

What does Statically Efficient mean?

Answer 13

Efficient at any one time

Question 14

What does Dynamically Efficient mean?

Answer 14

Becoming more efficient over time

Question 15

What does X-Inefficiency mean?

Answer 15

In an uncompetitive market, a dominant firm would rather raise prices than lower avg. cost

Question 16

Who observed Division of Labour?

Answer 16

Adam Smith

Question 17

What is the Division of Labour?

Answer 17

Splitting production into a number of short processes, so each workers can focus on 1-2 tasks

Question 18

Positives of Division of Labour

Answer 18

Increased output, more skilled workers, lower avg. costs

Question 19

Negatives of Division of Labour

Answer 19

Workers get bored/demoralised, less well-rounded workers, risk of mechanisation

Question 20

What is Specialisation?

Answer 20

Labourers focussing on tasks they’re most skilled at

Question 21

How is Division of Labour different to Specialisation?

Answer 21

A singular worker can be specialised to their trade, without needing to divide the process into many steps and use other workers