A measure of efficiency defined as the ratio of outputs to inputs, reflecting how effectively labor and capital are used.

• A. Purchasing
• B. Productivity
• C. Specialization
• D. Capital Intensive

Answer: (B)

Productivity is the ratio of outputs to inputs, showing how effectively labor and capital are used. This measure captures efficiency because it directly links what a business produces to the resources it uses. When outputs rise without needing more inputs, productivity increases, signaling better use of resources and lower costs per unit. Conversely, if you produce less with the same inputs, or need more inputs for the same output, productivity falls. This concept helps explain why firms focus on improving processes, training, or technology to squeeze more from the same resources.

For contrast, purchasing is about obtaining resources, specialization is about focusing on specific tasks to improve efficiency, and being capital intensive describes the mix of inputs used rather than a measure of efficiency. Example: a worker makes 200 widgets in 100 hours, giving productivity of 2 widgets per hour; producing 240 widgets in the same 100 hours would raise productivity to 2.4 widgets per hour.