Consider the following two systems of production, which produce the same quantity. A (assemble by hand) requires: 35 workers 1 robot B (assemble by robot) requires: 5 workers 4 robots Price of one unit of inputs (thousands): worker: £2 robot: £50 Draw the axes of a cost diagram as follows: · units of labour on the x-axis, with a scale from 0 to 70 · units of capital on the y-axis, with a scale from 0 to 5. Now mark system A and system B as points on this diagram. Draw an isocost line at C = £120. Comment on which system you would choose, and why.
Consider the following two systems of production, which produce the same quantity. A (assemble by hand) requires: 35 workers 1 robot B (assemble by robot) requires: 5 workers 4 robots Price of one unit of inputs (thousands): worker: £2 robot: £50 Draw the axes of a cost diagram as follows: · units of labour on the x-axis, with a scale from 0 to 70 · units of capital on the y-axis, with a scale from 0 to 5. Now mark system A and system B as points on this diagram. Draw an isocost line at C = £120. Comment on which system you would choose, and why.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Consider the following two systems of production, which produce the same quantity.
A (assemble by hand) requires: 35 workers 1 robot
B (assemble by robot) requires: 5 workers 4 robots
Draw the axes of a cost diagram as follows:
· units of labour on the x-axis, with a scale from 0 to 70
· units of capital on the y-axis, with a scale from 0 to 5.
Now mark system A and system B as points on this diagram. Draw an isocost line at C = £120. Comment on which system you would choose, and why.
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