Introduction

The economic performance and efficiency of firms is a major concern of many individuals, including policy makers, consumers, economists, and managers of the firms themselves. Policy makers attempt to determine how economic growth, full employment and other indicators of economic performance can be enhanced, or at least not harmed, by policies that affect firm behavior. Consumers believe firms that produce more efficiently tend to produce at lower prices and higher production levels. Economists are interested in what causes fluctuations in production, costs, and associated economic performance measures, and how decisions of firms are linked to realizations of these indicators. Firms’ desires to provide quality product at the lowest cost in order to maximize revenues for any given cost structure are facilitated by efficient production. All of these economic agents, therefore, need interpretable measures of economic performance and efficiency to use to motivate their analyses and actions.