Cost-Minimizing Production Choice

A firm plans to produce 100 units of a product and is evaluating two different production methods. The inputs required for this level of output and their current market prices are listed below:

• Method X: Requires 10 workers and 3 tonnes of coal.

• Method Y: Requires 4 workers and 6 tonnes of coal.

• Input Prices:

  • Wage per worker: $50
  • Price per tonne of coal: $120

Based on this information, which production method should the firm adopt to minimize its costs?

Impact of Changing Input Prices on Technology Choice

Technology Adoption in Different Economic Contexts

A clothing manufacturer currently uses a labor-intensive method to produce 1,000 shirts. An alternative, more machine-intensive method is available but has been more expensive. Recently, the government significantly increased the minimum wage for factory workers. How should this change in labor cost affect the manufacturer's choice of production technology?

A textile firm in Country X uses a highly automated, capital-intensive production process, while a competitor in Country Y produces the same quantity of textiles using a more labor-intensive process. This necessarily means that the technology used in Country X is more advanced and efficient.

A firm can produce 100 units of a good using one of four available technologies, each requiring a different combination of labor (workers) and energy (tonnes of coal), as shown below:

• Technology A: 2 workers, 10 tonnes of coal
• Technology B: 3 workers, 7 tonnes of coal
• Technology C: 5 workers, 5 tonnes of coal
• Technology D: 8 workers, 4 tonnes of coal

Given that the firm's objective is to minimize production costs, which technology is the most economically viable if the price of coal is significantly higher than the wage rate for a worker?

An international car manufacturer produces the same model of electric vehicle in two different countries, Germany and Vietnam. In its German factory, the production line is highly automated, relying heavily on robotic machinery (capital). In its Vietnamese factory, the same production tasks are performed by a larger workforce with less automation (labor). Assuming the company aims to minimize production costs in both locations, what is the most logical conclusion that can be drawn about the relative prices of labor and capital in these two countries?

Evaluating a Technology Switch Decision

A firm can produce a specific quantity of goods using one of the three technologies below, each requiring a different combination of labor and capital:

• Technology A: 10 workers, 3 machines
• Technology B: 6 workers, 6 machines
• Technology C: 3 workers, 10 machines

Match each economic scenario (based on the relative prices of these inputs) to the technology that a cost-minimizing firm would select.