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Evaluating Production Expansion Strategies
Imagine a bakery that currently produces 100 cakes per day. Each cake is made by a single baker who manually mixes ingredients in a bowl and bakes it in a standard oven. The bakery owner wants to increase production to 500 cakes per day and is considering two different plans.
- Plan A: Hire four more bakers and purchase four more standard ovens. Each of the five bakers will continue to make cakes using the original manual process.
- Plan B: Purchase a large industrial mixer that can prepare batter for 500 cakes at once and a conveyor oven that bakes cakes continuously. This would require retraining the existing baker to operate the new machinery.
Analyze both plans from an economic perspective. Which plan represents a change in the bakery's production technology? Justify your answer by explaining the economic definition of technology and how it applies to each plan.
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