Question

Suppose there are 5 different ways to produce 100 square yards of cloth, using labor (measured as the number of workers) and energy (measured as tons of coal): Technology for producing 1002 yards of cloth | # of workers tons of coal (T) 9 8 6 10 a) Draw a graph to represent these five technologies. Put tons of coal on the vertical axis and numbers workers on the horizontal axis. b) Which technologies would never be used by profit maximizing firms? That is, which technologies are dominated by the other technologies? Explain why. e) Of the remaining technologies which technology is relatively labor intensive and which technology is relatively energy intensive? d) Complete the following table. What technologies will be adopted at different wages and prices of coal?

Answer 1

A. The graph attached shows the five technologies.

C. Technology D is labor intensive as it is using the maximum workers and Technology A is the most energy intensive.

D. The graph will shift as per the prices of labor or coal. Incase, the price of labor increases with respect to the technology, the technology will shift towards labor. Similarily, as the price of technology will rise, the method will shift being the labor intensive.