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Production Method Adjustment
A factory manager currently uses 'Technology A' to produce 100 units of a product per day. A new government regulation has caused the daily wage for workers to increase substantially, while the price of coal has remained the same. The manager must now choose a new production method from the available options to maintain profitability. Analyze the technologies listed below and determine which one the factory is most likely to adopt. Justify your choice based on the change in input costs.
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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
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Innovation in Suit-Making Technology
Production Method Adjustment
A company manufactures furniture using 'Method A', which requires 10 hours of labor and 2 machine-hours to produce one table. A new 'Method B' is developed, which requires only 4 hours of labor but 5 machine-hours to produce the same table. Which of the following scenarios would provide the strongest economic incentive for the company to switch from Method A to Method B?
Incentives for Technological Adoption
A manufacturing firm will always choose to adopt a new production technique if it reduces the number of workers required to produce a specific quantity of goods, regardless of any other changes in resource requirements.
A firm produces 100 widgets and is currently using 'Technology A'. The firm is considering four different production technologies, each with different requirements for labor and capital, as shown in the table below. Initially, the wage for a worker is $10, and the rental cost of capital is $40. Suddenly, the wage for a worker increases to $30, while the cost of capital remains unchanged. Based on this change, what is the most profitable action for the firm to take?
Technology Number of Workers Units of Capital A 10 2 B 6 3 C 4 7 D 2 10 Evaluating the Adoption of a New Production Process
A manager of a textile factory, which currently uses a set of standard looms, learns about a new, highly automated loom. This new loom requires fewer workers to operate but consumes more electricity per meter of cloth produced. Arrange the following steps in the logical order a profit-maximizing manager would follow to decide whether to adopt the new technology.
Match each change in the relative cost of production inputs with the type of technological innovation it would most likely incentivize a firm to adopt.
A textile mill produces 500 meters of fabric per day using a process that requires 8 workers and 3 machines. A new process is introduced that can produce the same amount of fabric with only 4 workers but requires 7 machines. If the daily wage per worker is $100 and the daily cost per machine is $50, adopting this new labor-saving process would result in a daily cost saving of $____.
Bakery's Response to Rising Labor Costs