The outputs and inputs of five water utilities are reported in Table 2. Assume the production frontier exhibits VRS.

a) Determine the input-oriented technical efficiency (ITE), cost-allocative efficiency (CAE) and cost efficiency (CE) of Utility C. Is Utility C technically efficient?

b) Use the ITE score to find a set of inputs that Utility C could use if it is to produce the same output and be regarded as technically efficient.

c) Use peer weights to find a set of inputs and outputs that Utility C could target if it wants to be regarded as fully technically efficient but not necessarily cost efficient. What other firms should Utility C study in its efforts to reach those targets?

d) Identify the input quantities that minimise the cost of producing the outputs currently produced by Utility C.

Table 2: Data for Water Utilities Quantities Prices Capital (Index) Utility Capital ($/hour) (Index) Output (GI) Labour Materials Labour Materials (hours) (Index) (Index) 400 3.4 5.2 21 35 11.3 171 400 1.9 1.5 1.0 18 166 32 B 35 C 300 6.7 2.5 2.4 21 174 500 2.1 0.3 2.7 21 233 27 200 1.2 0.2 21 183 18 E 1.1 AU A Table 2: Data for Water Utilities Quantities Prices Capital (Index) Utility Capital ($/hour) (Index) Output (GI) Labour Materials Labour Materials (hours) (Index) (Index) 400 3.4 5.2 21 35 11.3 171 400 1.9 1.5 1.0 18 166 32 B 35 C 300 6.7 2.5 2.4 21 174 500 2.1 0.3 2.7 21 233 27 200 1.2 0.2 21 183 18 E 1.1 AU A