Why must firms try to employ the most economically efficient production techniques?

Expert Solution

As we know that this is the era of cut-throat competition and customers are looking for the products which are cheap yet of superior quality. Due to this higher completion, the companies with the high-cost process will automatically be pushed out of the market. In order to maximize the profitability, it is important for the producers to produce their products at the minimum per unit cost so that products can be offered at the lowest possible price to the customers. In order to accomplish this objective, it is important for the organizations to implement least cost production and have the right combination of labor and capital as per the given prices and productivity of the resources. This is the reason why Least-cost production- firms must employ the most economically efficient technique of production.

In order to gain the economic efficiency, it is mandatory for the manufacturers to obtain a certain output within the minimum requirement of input of scarce resources in the case when both output and resource are measured in monetary terms.

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