Condition for Preferring Technology B over a Superior Technology (A-prime)

Technology Choice in a Low-Wage Economy

An international manufacturing firm observes that its factory in a high-wage country uses fully automated robotic arms for assembly, while its factory in a low-wage country uses a much older, manual assembly line to produce the same product. From an economic standpoint, what is the most likely reason for this difference in technology adoption?

The continued use of older, more labor-intensive production methods in a country, despite the availability of more modern, capital-intensive alternatives, is definitive proof that the country's firms are acting irrationally or are unaware of the better technologies.

Economic Rationale for Outdated Technology

Economic Rationale for Labor-Intensive Technology

Match each economic condition with the corresponding technology choice and its graphical representation.

In an economic model explaining why older, more labor-intensive technologies persist in some regions, what is the primary factor that causes the isocost line to be very flat, making these older methods the least-cost option?

An economy has historically relied on production methods that require a large amount of labor and very little machinery. If this economy experiences a sustained and significant increase in its average wage level, while the cost of machinery remains stable, what is the most probable long-term outcome for its industries?

Policy Evaluation for Industrial Modernization

A developing country's textile industry predominantly uses old, manually operated looms, which require a large workforce but little capital investment. A new, automated loom technology exists that is far more productive but has a high purchase price. If a global innovation suddenly causes the price of these new automated looms to fall by 50%, but wages in the developing country remain unchanged and very low, what is the most likely impact on the country's textile industry?