Question

In the following diagram you are given two technologies, A and B, which can produce 100 meters of cloth. Technology A uses 1 worker and 4 tonnes of coal, while technology B uses 4 workers and 2 tonnes of coal. The diagram also depicts three examples of isocost curves, NM, GF and JH. The wage and the price of coal are denoted by w and p, respectively 10 6 ad Number of workers In period 1, the wage cost and the price of coal are (w, p) ($10, $20) and in period 2, the wage cost and the price of coal change to (w. p) ($20. $10) Which of the following statements is correct? Technology A is cheaper than Technology B in both periods. O Technology B is cheaper than Technology A in both periods. O Technology A is cheaper in period 1 and Technology B is cheaper in period 2 ( Technology B is cheaper in period 1 and Technology A is cheaper in period 2.

I got the first question answered but I can't seem to get an answer for the second image. (the second image is based off the first image).

Answer 1

Q1
Answer
Option 4
the technology B has a lower cost in period 1 and technology A has a lower cost in period 2.

technology A
period 1
cost=10*1+20*4=90

period 2
cost=20*1+10*4=60
====
technology B
period 1
cost=4*10+20*2=80

period 2
cost=4*20+10*2=100
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Q2
Answer
Option 4
there is a positive economic rent in switching from technology B to A in period 2

total revenue in both periods is 100*2=200
profit for technology A
period 1
Profit=TR-Cost
profit=200-90=110
Profit for technology A for period 2=200-60=140
Profit for technology B for period 1=200-80=120
Profit for technology B for period 2=200-100=100
The switching from B to A in period 2 increases profit by $40