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Choosing a Technology Based on Relative Input Prices
Formula for Calculating Production Cost
The total cost of production is calculated by summing the costs of all inputs. For a production process using labor and coal, the cost is the sum of the total wages paid to workers and the total expenditure on coal. This can be expressed verbally and symbolically as: Here, 'w' represents the wage, 'N' is the number of workers, 'p' is the price per ton of coal, and 'R' is the number of tons of coal.
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Social Science
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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
Related
Algebraic Representation of an Isocost Line
Five Available Technologies for Producing 100 Metres of Cloth
Cost Scenario: Wage £4, Coal Price £6
Condition for Choosing Energy-Intensive Technology A
Formula for Calculating Production Cost
Production Method Decision
A firm produces a specific quantity of cloth and can choose from three production technologies, each using a different combination of labor and coal:
- Technology X: 10 workers, 3 tons of coal
- Technology Y: 6 workers, 6 tons of coal
- Technology Z: 3 workers, 10 tons of coal
Initially, the daily wage for a worker is 20 per ton. Later, a new regulation increases the minimum wage, raising the cost of a worker to $50 per day, while the price of coal remains unchanged.
Given this change in input prices, which action represents the most cost-effective decision for the firm?
Evaluating Production Advice
A textile factory currently uses a production method that requires a large number of workers but a relatively small amount of coal to produce 1000 meters of fabric. If the price of coal doubles while wages for workers remain the same, the factory should continue using its current production method to minimize costs, assuming other efficient production methods exist that use more coal and fewer workers.
A firm can produce a standard batch of goods using one of three available technologies, each with different input requirements for labor and energy. Match each input price scenario with the technology that represents the most cost-effective choice for the firm.
Rationale for Technology Choice
A manufacturing firm uses a production process that requires 8 workers and 4 tons of coal to produce one batch of its product. If the daily wage for a worker is 50 per ton, the total cost to produce one batch is $____.
A company can produce a standard batch of goods using one of two available production methods:
- Method Alpha: Requires 8 workers and 2 tons of raw material.
- Method Beta: Requires 3 workers and 7 tons of raw material.
The price of the raw material is fixed at $20 per ton. The company's goal is to select the method that minimizes total production cost. At what specific wage per worker would the company be indifferent, meaning both methods result in the exact same total cost?
A company manufactures a product and has two technically efficient production methods available. Method 1 is capital-intensive, requiring 2 workers and 10 units of machinery. Method 2 is labor-intensive, requiring 8 workers and 4 units of machinery. The cost of one unit of machinery is fixed at $50. The company will choose the method that minimizes its total production cost. Under which condition should the company choose the capital-intensive Method 1?
Condition for Choosing Labor-Intensive Technology E
Diagram for Comparing Efficient Technologies A, B, and E
A firm aims to produce a set quantity of goods and has identified several technically efficient production methods. Each method uses a different combination of two inputs: labor and capital. Arrange the following actions into the correct logical sequence the firm must follow to choose the single most cost-effective production method.
Learn After
A textile firm needs to produce 100 meters of fabric and has two production methods available. Method X is energy-intensive, requiring 2 workers and 6 tons of coal. Method Y is labor-intensive, requiring 7 workers and 2 tons of coal. Given that the wage per worker is 30 per ton, which method should the firm choose to minimize its production cost?
Cost Minimization and Technology Choice
Calculating an Unknown Input Price
Determining the Point of Indifference for Production Technologies
A manufacturing firm calculates its total production cost using the formula: Total Cost = (Wage × Number of Workers) + (Price of Steel × Tons of Steel). The firm currently uses both workers and steel in its production process. If the wage paid to workers increases by 20%, while the number of workers and the amount and price of steel remain constant for a given production run, which statement accurately describes the impact on the firm's total production cost?
A firm produces widgets using 5 workers and 10 tons of steel. If the wage for each worker is 80 per ton, the total production cost for the firm is $925.
Deconstructing Total Production Cost
A furniture company uses 10 workers and 3 cubic meters of wood to produce a batch of chairs. If the wage for each worker is 150 per cubic meter, the total production cost for the batch is $____.
Analyzing a Production Cost Miscalculation
Variables in the Production Cost Formula