the competence of a business or the worth of a process, piece of equipment, or machine as judged by output per unit cost of resources used —note maximum efficiency in the use of resources requires the attainment of three conditions: (a) operation of the firm at the lowest long-run average cost (for a firm operating in a competitive market, the point of greatest efficiency occurs when the price, or marginal revenue, equals the marginal cost at the minimum long-run average cost), (b) use of resources in the least-cost combination, i.e., the best combinations of factors given their prices and technological constraints (at the least-cost combination, the marginal rates of substitution between each set of factors equal the ratios of the prices of the factors), and (c) provision of maximum incentive for developing and introducing new techniques This definition last updated 10/25/2008