Measures of Efficiency

Document Type:Essay

Subject Area:Economics

Document 1

Regardless of the conversion, the ratio us the measure of efficiency (Abel & Bara, 2017). The process entails either maximizing the output by keeping the inputs constant or minimizing the inputs and keeping the outputs constant. A VRS is a model which allows the change in inputs to cause a change in the outputs as well proportionally. In a pure efficiently cases, the bank is unable to reduce more output with the current input without the use of a model that would assist the chance in this situation. The real efficiency is achieved, therefore, when the inputs are varied using a VRS to produce the same quantity of output with the variation of the inputs. The scale efficiency is; therefore, the optimal size of a unit’s operation is optimal, and any modification would render it (unit) less efficient.

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