MyLab Economics with Pearson eText -- Access Card -- for Principles of Microeconomics
17th Edition
ISBN: 9780134081168
Author: CASE, Karl E.; Fair, Ray C.; Oster, Sharon E.
Publisher: PEARSON
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Question
Chapter 7, Problem 3.5P
(a)
To determine
Cheapest technology in a high-wage country.
(b)
To determine
Cheapest technology in a low-wage country.
(c)
To determine
Changes in employment.
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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?
Donny, of Donny's Doughnuts, bakes and sells 100 dozen doughnuts a day using one mixer and one fryer. His rival, Sunshine, of Sunshine's Doughnuts, produces 180 dozen doughnuts a day using two mixers and two fryers. Both shops use the exact same technology to make doughnuts and have the same number of workers and the same size building.
Donny and Sunshine both increase their capital equipment by one mixer and one fryer.
Which shop will benefit the most from its expansion?
a. Sunshine, because her operation was producing more doughnuts to start with.
b. Donny, because his workers currently have less available capital to work with.
c. The local weight‑loss clinic, because the number of doughnuts consumed will increase.
d. The shops will benefit equally because they are using the same quantity of equipment.
How much should Donny realistically expect his production to increase with the new equipment?
a. about 50 dozen
b. at least 100 dozen
c. about 80 dozen
How…
Most firms in the apparel and footwear industries choose to outsource production to countries where labor is abundant (primarily, Southeast Asia and the
Caribbean)long dash—but
those firms do not integrate with their suppliers there. On the other hand, firms in many capital-intensive industries choose to integrate with their suppliers.
What could be some differences between the labor-intensive apparel and footwear industries on the one hand and capital-intensive industries on the other hand that would explain these choices?
A multinational may prefer to
Chapter 7 Solutions
MyLab Economics with Pearson eText -- Access Card -- for Principles of Microeconomics
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