A firm can use three different production technologies, with capital and labor r

Question

A firm can use three different production technologies, with capital and labor requirements at each level of output as follows:

a. Suppose the firm is operating in high-wage country, where capital cost is $100 per unit per day and labor cost is $80 per worker per day. For each level of output, which technology is cheapest?

b. Now suppose the firm is operating in a low-wage country, where capital cost is $100 per unit per day but labor cost is only $40 per unit per day. For each level of output, which technology is cheapest?

c. Suppose the firm move 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?

A firm can use three different production technologies, with capital and labor requirements at each level of output as follows: a. Suppose the firm is operating in high-wage country, where capital cost is $100 per unit per day and labor cost is $80 per worker per day. For each level of output, which technology is cheapest? b. Now suppose the firm is operating in a low-wage country, where capital cost is $100 per unit per day but labor cost is only $40 per unit per day. For each level of output, which technology is cheapest? c. Suppose the firm move 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?

Explanation / Answer

please find the below table will give clarity on first two questions

a) According to the above table technology 1 is cheapest at output of 150.

b)Here also technology 1 is cheapest at output of 150.

c)if thefirm moves from a high-wage to a low-wage country but its level of output remains constant at 200 units per day, then employement will reduce.

A(High-wage country) B(Low-wage country) Out Put Capital Requirement Labour requirement k=100,L=80 Cost Per Unit k=100,L=80 Cost Per Unit Technology 1 100 3 7 30560 305.6 30280 302.8 150 3 10 45800 305.3 45400 302.7 200 4 11 80880 404.4 80440 402.2 250 5 13 126040 504.2 125520 502.1 Technology 2 100 4 5 40400 404.0 40200 402.0 150 4 7 60560 403.7 60280 401.9 200 5 8 100640 503.2 100320 501.6 250 6 10 150800 603.2 150400 601.6 Technology 3 100 5 4 50320 503.2 50160 501.6 150 5 5 75400 502.7 75200 501.3 200 6 6 120480 602.4 120240 601.2 250 7 8 175640 702.6 175320 701.3

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