Analysis of Production Technology Choice
A manufacturing firm must choose between two production methods to produce a specific quantity of output. The wage for a worker is £10, and the price of coal is £5 per ton.
- Method A requires 8 workers and 2 tons of coal.
- Method B requires 2 workers and 10 tons of coal.
Analyze which method the firm should choose. In your response, you must calculate the total cost for each method and explain the economic principle that justifies your recommended choice.
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Cost Scenario: Wage £10, Coal Price £5
Technology Choice and Input Price Changes
A firm produces a specific quantity of output and can use different combinations of labor and coal. The wage for a worker is fixed at £10. The price of coal has just fallen to £5 per ton. The table below shows three available production technologies. To minimize production costs, which technology should the firm now choose?
Technology Number of Workers Tons of Coal A 2 10 B 8 2 C 5 5 Cost Minimization with New Input Prices
A manufacturing firm can use one of three different technologies to produce a specific quantity of output. The wage for a worker is £10, and the price of coal has just fallen to £5 per ton. Match each technology, described by its input requirements, with its total production cost.
A firm is choosing between several production technologies. The wage for a worker is £10, and the price of coal has just fallen to £5 per ton. True or False: Following this price change, the firm will always choose the production technology that uses the greatest quantity of coal to minimize its costs.
A firm needs to produce a certain amount of output and has three technologies available, as shown in the table below. The wage for a worker is £10, and the price of coal has just fallen to £5 per ton. Given these input prices, the minimum cost to produce the output is £____.
Technology Number of Workers Tons of Coal X 4 6 Y 2 12 Z 7 3 Analysis of Production Technology Choice
A firm is re-evaluating its production methods after the price of coal fell to £5 per ton, while the wage for a worker remained at £10. Arrange the following steps in the logical order a cost-minimizing firm would follow to determine the most efficient production technology.
A factory uses two inputs: labor and coal. The wage for a worker is £10. When the price of coal was higher, the firm found it cheapest to use Technology P, which requires 6 workers and 3 tons of coal. Now, the price of coal has fallen to £5 per ton. The firm is also considering Technology Q, which uses 3 workers and 8 tons of coal. A manager argues that since the cost of using Technology P has fallen, there is no need to switch.
Which statement best analyzes the manager's argument from a cost-minimization perspective?
Evaluating a Production Decision