Technical efficiency refers to the ability of a firm or organization to produce the maximum output from a given set of inputs. It measures how well resources, such as labor, capital, and materials, are utilized in the production process. When a company operates at technical efficiency, it minimizes waste and optimizes productivity, leading to cost savings and improved performance. In economic terms, achieving technical efficiency means that a firm is on its production possibility frontier, where it cannot produce more of one good without reducing the output of another. This concept is crucial for economists and business managers as it helps identify areas for improvement and enhances overall competitiveness in the market.