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Impact of Relative Input Price Changes on Technology Choice
A manufacturing firm has several available methods to produce a set quantity of goods, each using a different combination of labor and coal. Initially, both a day of labor and a ton of coal cost £10. Now, the price of coal has fallen to £5 per ton, while the wage for labor remains at £10 per day. Analyze how this change in the price of coal, relative to the wage, influences the firm's decision-making process for choosing the most cost-effective production method. In your analysis, explain which type of production method becomes more attractive and why.
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