Evaluating a Technology Adoption Proposal
A manager is presented with a proposal to switch production technologies after a recent change in input costs. You are asked to evaluate the financial analyst's conclusion. Is the analyst's claimed economic gain correct? Justify your answer with calculations.
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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
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First-Mover Advantage in Technology Adoption
A firm produces 100 meters of cloth. Initially, it uses a technology requiring 4 workers and 2 tons of coal. The wage for a worker is £10 and the price of a ton of coal is £20. Then, the wage increases to £40 per worker, while the price of coal remains unchanged. A new technology becomes available that requires only 1 worker and 6 tons of coal to produce the same 100 meters of cloth. What is the economic gain for a firm that is the first to switch to the new technology after the wage increase?
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Analyzing the First-Adopter Advantage
A textile firm produces 100 shirts using a production method that requires 10 workers and 2 tonnes of coal. The daily wage for a worker is $20, and the price of coal is $50 per tonne. A sudden labor shortage causes the daily wage to double to $40, while the price of coal remains unchanged. In response, a new, more energy-intensive production method becomes viable, requiring only 2 workers and 8 tonnes of coal to produce the same 100 shirts. Which of the following statements correctly analyzes the economic advantage for the first firm to adopt the new production method?
A manufacturing plant produces widgets using a process that requires 10 labor hours and 3 units of energy per widget. The cost of labor is $20 per hour and the cost of energy is $40 per unit. A new, more energy-intensive process is developed that requires only 4 labor hours but 9 units of energy per widget. Following a market shock, the cost of labor increases to $50 per hour, while the cost of energy remains unchanged. The economic gain per widget for the first firm to adopt the new process is $____.
Strategic Technology Adoption in Logistics
A logistics company uses a process to move one shipping container that requires 5 units of labor and 10 units of fuel. The price of labor is $100 per unit and fuel is $50 per unit. After a new labor agreement, the price of labor rises to $200 per unit, while the fuel price stays the same. A new, more fuel-intensive process becomes available that uses only 2 units of labor and 15 units of fuel. True or False: The first company to adopt the new process would realize an economic gain of $350 per container compared to sticking with the old process.
Evaluating a Technology Adoption Proposal
Production Technology Choice and Economic Gain