Business Week, in an article dealing with management, wrote, "When he took over the furniture factory three years ago...[the manager] realized almost immediately that it was throwing away at least $100,000 a year worth of wood scrap. Within a few weeks, he set up a task force of managers and workers to deal with the problem. And within a few months, they reduced the amount of scrap to $7,000 worth [per year]." Was this necessarily an economically efficient move?

This would depend upon how much it cost him to reduce the waste by 193,000 dollars.

Sra

P.S. Reducing waste is always a benefit unless it costs you more than the waste!

Well why didn't he just sell the scrap wood? It's not economically efficient if he throws out something he could sell.

And yes, of course it depends how much it cost those managers and workers in time to save the $7000 and what else could they have been working on.

To determine whether this was an economically efficient move, we need to understand the concept of economic efficiency and analyze the information provided.

Economic efficiency refers to the optimal allocation and utilization of resources to maximize economic benefits. In this case, the manager identified a problem of wood scrap being wasted and took measures to reduce it.

To assess economic efficiency, we can compare the costs and benefits associated with the implementation of the task force. From the given information, we know that prior to the interventions, the furniture factory was throwing away at least $100,000 worth of wood scrap annually. After the implementation of the task force, they were able to reduce the amount of scrap to $7,000 worth per year.

By reducing the wastage of wood scrap, the manager was able to save the company $93,000 ($100,000 - $7,000 = $93,000) per year. This represents a significant cost reduction, which indicates an improvement in economic efficiency.

Therefore, based on the information provided, it can be concluded that setting up the task force to address the problem of wood scrap was an economically efficient move, as it resulted in significant annual savings for the furniture factory.