A firm can use three different production technologies, with capital and labour requirements at each level of output as follows: Technology 1Technology 2Technology 3Daily OutputKLKLKL1003745541503104755200411586625051361078 a. Suppose the firm is operating in a high-wage country, where capital cost is $100 per unit per day and labour cost is $80 per worker per day. For each level of output, which technology is the cheapest?Now suppose the firm is operating in a low-wage country, where capital cost is $100 per unit per day but labour cost is only $40 per unit per day. For each level of output, which technology is the cheapest?Suppose the firm moves from a high-wage to a low-wage country but its level of output remains constant at 200 units per day. How will its total employment change?

The main objective of every firm is to utilize its inputs in such a way that its profits are…

Answered: Suppose the firm is operating in a…

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter7: Production And Cost In The Firm

Section: Chapter Questions

Problem 3.7P

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A firm can use three different production technologies, with capital and labour requirements at each level of output as follows:

	Technology 1	Technology 2	Technology 3
Daily Output	K	L	K	L	K	L
100	3	7	4	5	5	4
150	3	10	4	7	5	5
200	4	11	5	8	6	6
250	5	13	6	10	7	8

a. Suppose the firm is operating in a high-wage country, where capital cost is $100 per unit per day and labour cost is $80 per worker per day. For each level of output, which technology is the cheapest?
Now suppose the firm is operating in a low-wage country, where capital cost is $100 per unit per day but labour cost is only $40 per unit per day. For each level of output, which technology is the cheapest?
Suppose the firm moves from a high-wage to a low-wage country but its level of output remains constant at 200 units per day. How will its total employment change?

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