Evaluating a Production Decision
A factory manager must choose a production technology using two inputs: labor, with a fixed wage of £10 per worker, and coal, whose price has just fallen to £5 per ton. The manager is considering two options:
- Technology Alpha: Requires 8 workers and 3 tons of coal.
- Technology Beta: Requires 4 workers and 9 tons of coal.
The manager decides to stick with Technology Alpha, arguing that the cost difference is negligible and not worth the disruption of switching processes. Based purely on the principle of cost minimization, critically evaluate the manager's decision. Is it the correct choice? Justify your conclusion with calculations.
0
1
Tags
Social Science
Empirical Science
Science
Economy
CORE Econ
Economics
Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.2 Technology and incentives - The Economy 2.0 Microeconomics @ CORE Econ
Evaluation in Bloom's Taxonomy
Cognitive Psychology
Psychology
Related
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