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Lecture 27-2005 - Applications in Production Economics...

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Applications in Production Economics Lecture XXVII
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Akridge, Jay T. “Measuring Productive Efficiency in Multiple Product Agribusiness Firms: A Dual Approach.” American Journal of Agricultural Economics 71(1)(Feb. 1989): 116–25.
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The purpose of this article is to determine how effectively a sample of retail multiproduct agribusinesses achieve an objective cost minimization.” “In particular, the frontier multiproduct cost function, which reflects the minimum cost of producing any given output vector as defined by the sample’s least-cost firms, provides the benchmark to make valid cost comparisons in multiple product firms.”
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“The frontier cost function can be used to compare the observed cost of any sample firm against the cost which the sample’s least-cost producers would incur if producing an identical output vector and provides the basis for computing Farrell-type indexes of productive, technical, and allocative efficiency.
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Measuring Productive Efficiency Let C R ( Y,W,K ) be the total variable costs of producing output vector Y using input vector X R , where W is a vector of variable input prices and K is a vector of quasi-fixed factors of production X R is the vector of inputs actually used.
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