FasterChip, Inc is considering five alternative techniques for assembling personal computers. The table shows the amounts of labor and capital required by each of these techniques to make 10 computers a day
Labor costs $15 an hour and capital costs $100 a unit. a) Which techniques are technologically efficient and which are not? Explain your answer. b) Which technique is economically efficient? Explain. c) If FasterChip uses its plant in Mexico, it can lower the labor cost to $10 an hour. Which technique will the company use in Mexico? Explain.
a) Technique B is technologically inefficient. It requires more labor and more capital than technique C to produce a given output. All other techniques are technologically efficient.
b) Economic efficiency occurs when the firm produces a given output at the least cost. Technique D has the lowest cost and therefore is economically efficient.
c) With the change in costs, the economically efficient method of production changes. The company will now use a more labor intensive technique A, which, with the lower labor cost, becomes the economically efficient method.
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A) can appropriate the income that arises from selling the services of the resource. B) enjoys physical possession of the resource. C) has legal title to the resource. D) has mixed the resource with individual effort to create private property.
People view alcohol and marijuana as perfect substitutes. This means that
A) individuals will consume either alcohol or marijuana, but not both, regardless of price. B) as the price of alcohol decreases, marijuana use decreases. C) the marginal utility for alcohol and marijuana is constant. D) Both B and C.