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 and2 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 1 2 345 6 7 89 10 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. O Technology B is cheaper in period 1 and Technology A is cheaper in period 2.

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I would greatly appreciate if I could get help

Answer 1

1.

combinations	A  $\times$ period 1 price	A$\times$period 2 price	B$\times$ period 1price	B$\times$period 2price
worker	1$\times$ 10= 10	1$\times$20=20	4$\times$10= 40	4$\times$20=80
coal per ton	4$\times$20 =80	4$\times$10=40	2$\times$20=40	2$\times$10=20
total	$90	$60	$80	$100

So according to this table option 4 fits that is technology B is cheaper in period 1 and technology A is cheaper in period 2.

2. Option 4 is correct because graph shows that due to factory act of 1844 and 1833 children left the workforce plus due to act of 1847 women also left leaving men workers at disposal which resulted in rise in male wages and again after extending voting rights to men the gap between productivity and wages started closing

3. a

6 workers$\times$ $20=$120	3 workers$\times$$20= $60
2 ton coal$\times$ $30=$60	4 ton coal $\times$$30=$120
total = $180	=$180

so option 1 stands correct because cost in both the cases is same.

Options 2,3 and 4 are wrong because the formula for slope of isocost line is [ price of labour / price of capital ]

180/180= 1

The cost associated with isocost line is $180

All the points above isocost will cost more than $180 and not $220