Condition for Preferring Technology B over a Superior Technology (A-prime)
Even when a technologically superior and more input-efficient option like A-prime is available, the older Technology B can remain the least-cost choice. This occurs under conditions of very low relative labor costs, which create a very flat isocost line. Graphically, this is represented by an isocost line that is flatter than the line HJ, allowing it to pass through point B at a lower total cost than it would for point A-prime.
0
1
Tags
History
Humanities
Economics
Social Science
Empirical Science
Science
Economy
CORE Econ
Ch.2 User-centered design process - User Experience Design - Winter 23 @ UI Design in UI @ University of Michigan - Ann Arbor
UI Design in UI @ University of Michigan - Ann Arbor
User Experience Design - Winter 23 @ UI Design in UI @ University of Michigan - Ann Arbor
UI @ University of Michigan - Ann Arbor
User Experience Design @ UI Design in UI @ University of Michigan - Ann Arbor
University of Michigan - Ann Arbor
Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.2 Technology and incentives - The Economy 2.0 Microeconomics @ CORE Econ
Related
Condition for Preferring Technology B over a Superior Technology (A-prime)
Technology Choice in a Low-Wage Economy
An international manufacturing firm observes that its factory in a high-wage country uses fully automated robotic arms for assembly, while its factory in a low-wage country uses a much older, manual assembly line to produce the same product. From an economic standpoint, what is the most likely reason for this difference in technology adoption?
The continued use of older, more labor-intensive production methods in a country, despite the availability of more modern, capital-intensive alternatives, is definitive proof that the country's firms are acting irrationally or are unaware of the better technologies.
Economic Rationale for Outdated Technology
Economic Rationale for Labor-Intensive Technology
Match each economic condition with the corresponding technology choice and its graphical representation.
In an economic model explaining why older, more labor-intensive technologies persist in some regions, what is the primary factor that causes the isocost line to be very flat, making these older methods the least-cost option?
An economy has historically relied on production methods that require a large amount of labor and very little machinery. If this economy experiences a sustained and significant increase in its average wage level, while the cost of machinery remains stable, what is the most probable long-term outcome for its industries?
Policy Evaluation for Industrial Modernization
A developing country's textile industry predominantly uses old, manually operated looms, which require a large workforce but little capital investment. A new, automated loom technology exists that is far more productive but has a high purchase price. If a global innovation suddenly causes the price of these new automated looms to fall by 50%, but wages in the developing country remain unchanged and very low, what is the most likely impact on the country's textile industry?
Learn After
A company can produce 100 computer chips using two different methods. Method A requires 2 workers and 10 machines. Method B requires 8 workers and 4 machines. Analyze the economic conditions under which a profit-maximizing firm would choose Method B over Method A.
Technology Choice in Textile Manufacturing
If a new production technology is introduced that uses fewer of all inputs (for example, both fewer workers and fewer machines) to produce the same amount of output, a cost-minimizing firm will always switch to this new technology, irrespective of the wages paid to workers or the rental cost of machines.
The Paradox of Obsolete Technology
A firm can produce 100 widgets using one of two available technologies. Technology B requires 10 workers and 2 machines. A newer, more efficient Technology A-prime requires only 4 workers and 5 machines. Match each relative input price scenario to the cost-minimizing technology choice a firm would make.
The Persistence of 'Outdated' Production Methods
Justifying an 'Obsolete' Technology Choice
A firm can produce a specific quantity of output using two available production technologies. Technology B requires 10 workers and 2 machines. A newer Technology A-prime requires 4 workers and 5 machines. If 'w' represents the wage rate for a worker and 'r' represents the rental cost of a machine, under which of the following conditions would a cost-minimizing firm choose to use the older Technology B?
Agricultural Production Decision
A firm is currently using Technology B, which requires 10 workers and 3 machines to produce a specific quantity of goods. A new, superior Technology A-prime becomes available that can produce the same quantity with only 5 workers and 2 machines. True or False: Given that Technology A-prime uses fewer of both inputs, it is impossible for Technology B to remain the cost-minimizing option, regardless of the relative costs of labor and machines.