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ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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8

Transcribed Image Text:The invention of a new machine serves as a mobile station for receiving and accumulating packed flats of strawberries
close to where they are picked, reducing workers' time and burden of carrying full flats of strawberries.
According to Rosenberg (2004), a machine-assisted crew of 12 pickers produces as much output, q*, as that of an
unaided crew of 20 workers. In a 6-day, 50-hour workweek, the machine replaces 400 worker-hours. At an hourly wage
cost of $10, a machine saves $4,000 per week in labor costs, or $104,000 over a 26-week harvesting season. The cost
of machine operation and maintenance expressed as a daily rental is $300, or $1,800 for a six-day week. Thus, the net
savings equal $2,200 per week, or $57,200 for 26 weeks.
Draw the q* isoquant assuming that only two production methods are available (pure labor and labor-machine). Label the
isoquant and axes as thoroughly as possible.
Add an isocost line to show which technology the firm chooses (be sure to measure wage and rental costs on a
comparable time basis).
The machine can be rented for $50 per hour (from $300 divided by 6 hours).
1.) Using the line drawing tool, graph the firm's isoquant for producing q* units output. Label this line 'I.'
2.) Using the line drawing tool, graph the firm's isocost line for producing q* units of output at lowest cost. Label this line
'L.'
Carefuly follow the instructions above, and only draw the required objects.
Hours of labor without the machine
26-
24-
22-
20-
E 18-
16-
14
12-
10-
8-
4
2
U-
6 8 10 12 14 16 18 20 22 24 26
Hours of labor with the machine
Q
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