The table below contains information of three techniques for producing $ 15 worth of bar soap. Assume that we said " $ 15 worth of bar soap" because soap costs $ 3 per bar and all three techniques produce 5 bars of soap ( $ 15=$ 3 per bar multiply on 5 bars). So you know each techniques produces 5 bars of soap. a) What technique will you want to use if the price of a bar of soap falls to $ 2. 75? What if the price of bar of soap rises to $ 4? What if the price of bar of soap rises to $ 5? b). How many bars of soap will you want to produce if the price of a bar of soap falls to $ 2. 00 ? ( a) Five: it is profitable to produce bars of soap at this selling price; b) Zero: It is not profitable to produce bars of soap at this selling price ). c) Suppose that the bar of soap is again $ 3 per bar but that the prices of all four resources are now $ 1 per unit. Which is now the least- profitable technique? d). if the resource prices returns to their original levels (the ones shown in the table), but a new technique is invented that can produce 3 bars of soap ( yes, 3 bars, not 5 bars), using 1 unit of each of the four resources, will firms prefer the new technique? If No, to which technique they will stick ( 1, 2 or 3)? Technique 1 Technique 2 Technique 3 Resource Price per unit Units Cost Units Cost Units Cost labor $ 2 4 $ 8 2 $ 4 1 $ 2 land 1 1 1 3 3 4 4 capital 3 1 3 1 3 2 6 Entrepreneurial ability 3 1 3 1 3 1 3 Total cost of $ 15 worth of bar soap $ 15 $ 13 $ 15
The table below contains information of three techniques for producing $ 15 worth of bar soap. Assume that we said " $ 15 worth of bar soap" because soap costs $ 3 per bar and all three techniques produce 5 bars of soap
( $ 15=$ 3 per bar multiply on 5 bars). So you know each techniques produces 5 bars of soap.
a) What technique will you want to use if the price of a bar of soap falls to $ 2. 75?
What if the price of bar of soap rises to $ 4?
What if the price of bar of soap rises to $ 5?
b). How many bars of soap will you want to produce if the price of a bar of soap falls to $ 2. 00 ? ( a) Five: it is profitable to produce bars of soap at this selling price; b) Zero: It is not profitable to produce bars of soap at this selling price ).
c) Suppose that the bar of soap is again $ 3 per bar but that the prices of all four resources are now $ 1 per unit. Which is now the least- profitable technique?
d). if the resource prices returns to their original levels (the ones shown in the table), but a new technique is invented that can produce 3 bars of soap ( yes, 3 bars, not 5 bars), using 1 unit of each of the four resources, will firms prefer the new technique? If No, to which technique they will stick ( 1, 2 or 3)?
| Technique 1 | Technique 2 | Technique 3 | ||||||
| Resource | Price per unit | Units | Cost | Units | Cost | Units | Cost | |
| labor | $ 2 | 4 | $ 8 | 2 | $ 4 | 1 | $ 2 | |
| land | 1 | 1 | 1 | 3 | 3 | 4 | 4 | |
| capital | 3 | 1 | 3 | 1 | 3 | 2 | 6 | |
| Entrepreneurial ability | 3 | 1 | 3 | 1 | 3 | 1 | 3 | |
| Total cost of $ 15 worth of bar soap | $ 15 | $ 13 | $ 15 |
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