Resource unit required |
Cost of technique |
||||||||
Resources |
Price resources |
Technique 1 |
Technique 2 |
Technique 3 |
Technique 4 |
Technique 1 |
Technique 2 |
Technique 3 |
Technique 4 |
Labor |
2 |
50 |
30 |
40 |
35 |
100 |
60 |
80 |
70 |
Land |
4 |
20 |
20 |
30 |
20 |
80 |
80 |
120 |
80 |
Capital |
3 |
20 |
50 |
30 |
40 |
60 |
150 |
90 |
120 |
Entrepreneurial |
5 |
40 |
40 |
50 |
45 |
200 |
200 |
250 |
225 |
440 |
490 |
540 |
495 |
Calculation:
Cost of technique |
|||
Technique 1 |
Technique 2 |
Technique 3 |
Technique 4 |
2*50=100 |
2*30=60 |
2*40=80 |
2*35=70 |
4*20=80 |
4*20=80 |
4*30=120 |
4*20=80 |
3*20=60 |
3*50=150 |
3*30=90 |
3*40=120 |
5*40=200 |
5*40=200 |
5*50=250 |
5*45=225 |
100+80+60+200=440 |
60+80+150+200=490 |
80+120+90+250=540 |
70+80+120+225=495 |
Technique 1 |
440 |
Technique 2 |
490 |
Technique 3 |
540 |
Technique 4 |
495 |
The firm will choose Technique 1 because it produces the output at the least cost. (Compared to other techniques) Production using technique 1 will give loss, Since TC > TR
TR = $400
TC = $440
Loss = TC – TR = 440-400
Loss = $40
Loss will be $40, causing the industry to contract.
Answer: Contract
nt Assume the firm finds that its profit will be at maximum when it produces $400...
Please answer a-d
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