Productive Efficiency (Quick Revision)

Question 1

Define: Productivity Efficiency

Answer 1

Productive efficiency is the effectiveness with which inputs are transformed into output.

Question 2

State two reasons why improving efficiency is important.

Answer 2

• To boost profits

* To cut costs and enable competitive pricing

Question 3

State three ways of improving productive efficiency.

Answer 3

• Boosting productivity
• Better capacity utilisation
• Achieving economies of scale

Question 4

Distinguish between efficiency and effectiveness.

Answer 4

Efficiency is how resources are used to do something; effectiveness is whether you are doing the right thing

Question 5

State three reasons why employees might resist attempts to improve efficiency.

Answer 5

• May involve extra work
• May involve change
• May involve redundancies

Question 6

What is the Examiner’s note for Productive efficiency?

Answer 6

Improving efficiency is important because it reduces costs. However, sometimes firms focus on this too much and do not check that they are in the right market and producing the right products to begin with.

Question 7

What is the Evaluation point for Productive Efficiency?

Answer 7

Improving efficiency and driving down costs are particularly important in a very competitive market.