1. A firm can use three different production technologies, with the capital and labor requirements at each level of output as follows: Technology 1 Technology 2 Technology 3 Daily output k 7 k 5 5 k 100 120 200 260 4 6 14 4 10 5 7 6 15 11 16 8 6 13 10 8 8 a. Suppose the firm is operating in a high-wage country, where capital cost is $100 per unit per day and labor cost is $70 per worker per day. For each level of output, which technology is cheapest? b. Now suppose the firm is operating in a low-wage county, where capital cost is $100 per unit per day but labor cost is only $50 per unit per day. For each level of output, which technology is cheapest? c. Suppose the firm moves from a high-wage to a low-wage country but its level of output remains constant at 200 units per day. How will its total employment change? 2. Briefly state the law of demand? What do we mean by change in demand and change in quantity demanded? (Explain with the help of diagrams)
1. A firm can use three different production technologies, with the capital and labor requirements at each level of output as follows: Technology 1 Technology 2 Technology 3 Daily output k 7 k 5 5 k 100 120 200 260 4 6 14 4 10 5 7 6 15 11 16 8 6 13 10 8 8 a. Suppose the firm is operating in a high-wage country, where capital cost is $100 per unit per day and labor cost is $70 per worker per day. For each level of output, which technology is cheapest? b. Now suppose the firm is operating in a low-wage county, where capital cost is $100 per unit per day but labor cost is only $50 per unit per day. For each level of output, which technology is cheapest? c. Suppose the firm moves from a high-wage to a low-wage country but its level of output remains constant at 200 units per day. How will its total employment change? 2. Briefly state the law of demand? What do we mean by change in demand and change in quantity demanded? (Explain with the help of diagrams)
Chapter7: Production And Cost In The Firm
Section: Chapter Questions
Problem 3.7P
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