A firm can use three different production technologies, with capital and labour requirements at each level of output as follows: Daily Output Technology 1 Technology 2 Technology 3 K L K L K L 100 3 7 4 5 5 4 150 3 10 4 7 5 5 200 4 11 5 8 6 6 250 5 13 6 10 7 8 a) Suppose the firm is operating in a high-wage country, where capital cost is $100 per unit per day and labour cost is $80 per worker per day. For each level of output, which technology is the cheapest? b) Now suppose the firm is operating in a low-wage country, where capital cost is $100 per unit per day and labour cost is $40 per worker per day. For each level of output, which technology is the cheapest? c) Suppose the firm moves from a high-wage to a low-wage country but that its level of output remains constant at 200 units per day. How will its total employment change
A firm can use three different production technologies, with capital and labour
requirements at each level of output as follows:
Daily
Output
Technology 1 Technology 2 Technology 3
K L K L K L
100 3 7 4 5 5 4
150 3 10 4 7 5 5
200 4 11 5 8 6 6
250 5 13 6 10 7 8
a) Suppose the firm is operating in a high-wage country, where capital cost is
$100 per unit per day and labour cost is $80 per worker per day. For each level
of output, which technology is the cheapest?
b) Now suppose the firm is operating in a low-wage country, where capital cost is
$100 per unit per day and labour cost is $40 per worker per day. For each level
of output, which technology is the cheapest?
c) Suppose the firm moves from a high-wage to a low-wage country but that its
level of output remains constant at 200 units per day. How will its total
employment change?
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