Hierarchical Organizations

Upto this point in the analysis the emphasis has been on the nonprice decisions of the firm. Technological efficiency of production has been taken for granted throughout the analysis. This can be stated in more concrete terms. Let x1,x2 be any two inputs in the production of Y and let $$Y = f ({x_1},{x_2})$$ be the neoclassical production function. Then the choices of inputs is technologically efficient if the management chooses x1,x2along the isoquant for a given Y It was assumed throughout the analysis that the management is motivated to choose the input combinations along the isoquant.