A textile firm is considering switching from its current production technology to a new one to produce a standard batch of 100 meters of cloth. The firm's revenue from selling a batch is fixed, as the market price for cloth is stable. The prices for inputs—labor and coal—also remain constant. The table below details the input requirements for each technology.
| Technology | Labor Required (workers) | Coal Required (tonnes) |
|---|---|---|
| Current | 4 | 2 |
| New | 2 | 3 |
The price of labor is £10 per worker, and the price of coal is £20 per tonne.
Based on this information, which statement correctly analyzes the financial consequence of switching to the new technology?
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How does the implementation of new technology impact the company's profit per 100 meters of cloth sold?
Which of the following statements correctly explains the profit impact of implementing new technology in the company's production process?
What is the main reason for the profit increase when the company switches to the new technology?
Why does the company's profit increase by £10 per 100 meters of cloth when switching to the new technology?
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A textile firm is considering switching from its current production technology to a new one to produce a standard batch of 100 meters of cloth. The firm's revenue from selling a batch is fixed, as the market price for cloth is stable. The prices for inputs—labor and coal—also remain constant. The table below details the input requirements for each technology.
Technology Labor Required (workers) Coal Required (tonnes) Current 4 2 New 2 3 The price of labor is £10 per worker, and the price of coal is £20 per tonne.
Based on this information, which statement correctly analyzes the financial consequence of switching to the new technology?
A manufacturing firm produces a standard unit of a product. The selling price for this unit and the prices for all production inputs are constant. The firm is currently using 'Technology X', which costs £200 per unit to operate. The firm is evaluating a switch to 'Technology Y', which would cost £225 per unit to operate. What would be the direct impact on the firm's profit per unit if it switches from Technology X to Technology Y?
A textile company switches to a new weaving technology. The cost to produce 100 meters of cloth increases from £50 to £55. Because the market price of cloth remains unchanged, the company's revenue for this quantity of cloth also remains unchanged. Therefore, this technology switch will increase the company's profit by £5.
Formula for Change in Profit