Question

Taking business personally: Could a firm achieve production efficiency with workers who are working well below their productive capabilities and with other resources that are not allocated to their most productive uses?

Answer 1

Production efficiency can be defined as a point where no unit of one good can be produced without reducing the production of other good. At this point, all the workers and production units are working to their full potential.

If the workers are producing at the capacity below their full capacity the firm only needs to increase their efficiency to achieve extra good i.e. they can produce an extra unit of the good without reducing the production of other good because excess capacity is lying with the firm at this point. So, no a firm cannot reach a production efficiency if its resources and labor are not fully utilized or allocated to their most productive uses.