Honda promotes Accord by saying “it has a fuel efficiency of 30 mpg (miles per gallon) on highway.” (1) What is incorrect about this statement? (2) If the best engine currently available can run at 48 mpg, what is Accord’s fuel efficiency? (3) Suppose next year, a breakthrough technology improves the best engine’s performance to 85 mpg and Accord’s to 50 mpg, what would be productivity growth, efficiency change, and technical change for Accord? (4) How can you check the results obtained above as correct? (Hint: it might help to draw an X-Y diagram.)
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