Question

Chapter 7 Handont. Ouestion 3 Table 7.1 Inputs Required to produce a Produc wred to Produce a Product Using Alternative Technologies logy Units of Capital Number of Employees 18 12 a. Refer to Table 7.1. Which technology is to Table 7.1. Which technology is the most labor intensive Tabor intenswe technolepy relies on labor et to Table 7.1. Which technology is the most capital intensive capital stenove technolopy relies on opy relies on coprtal c. Refer to Table 7.1. If the hourly wage rat which production technology should be selected? 1. If the hourly wage rate is $7 and the hourly price of capital is $10, -(PK KI+CPL K: Quody of capital, L! quantity of robe Pa pace of capital, FL - pace of labor d. Refer to Table 7.1. If the hourly wage rate is $10 and the hourly price of capital is 325, which production technology should be selected? Note: The optimal technology to be selected msnsmees COST.

Answer 1

Answer:

question 1)

Since technology A requires highest number of labor so Teachnology A is labor intensive.

Question 2)

Since technology D requires highest number of Capital so Teachnology D is Capital intensive.

Question 3)

Cost of Labor Cl=$7/hour

Cost of Capital Cc=$10/hour

Total cost= Cost of Capital+Cost of Labor

Technology	Capital A	Labor B	Cost of Capital= A*Cc	Cost fo Labor=B*Cl	Total Cost
A	4	18	40	126	166
B	6	12	60	84	144
C	8	8	80	56	136
D	12	6	120	42	162

From Aove table it is clear that total cost for Technology C is minimum. So technology C will be selected.

Question 4)

Cost of Labor Cl=$10/hour

Cost of Capital Cc=$25/hour

Total cost= Cost of Capital+Cost of Labor

Technology	Capital A	Labor B	Cost of Capital= A*Cc	Cost fo Labor=B*Cl	Total Cost
A	4	18	100	180	280
B	6	12	150	120	270
C	8	8	200	80	280
D	12	6	300	60	360

From Aove table it is clear that total cost for Technology B is minimum. So technology B will be selected.