Technology B uses 4 workers and 2 tonnes of coal to produce 100 meters of cloth. The worker's wages cost $10 and coal costs $5. We have previously calculated that the total cost of production is $50 and that the vertical intercept of the isocost line is 10.If there was a technology that used 1 more worker, how much would it have to decrease the coal required in order to cost the same? (Note: this is the absolute value of the slope of the isocost line.)

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Asked Jan 25, 2019
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Technology B uses 4 workers and 2 tonnes of coal to produce 100 meters of cloth. The worker's wages cost $10 and coal costs $5. We have previously calculated that the total cost of production is $50 and that the vertical intercept of the isocost line is 10.

If there was a technology that used 1 more worker, how much would it have to decrease the coal required in order to cost the same? (Note: this is the absolute value of the slope of the isocost line.)

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Expert Answer

Step 1

As the cost of production is $50, and the technology uses labor and coal. Labor is priced at $10 and coal at $5. Since, the number of labor are 4, the cost here is $40 (4 x $10) and coal is 2 (2 x $5), the cost is $10 making it a total of $50.

Step 2

If there was a technology to use 1 more labor, then the amount of reduction in coal should be equal to 2 tonnes as the cost of one additional labor is ...

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