Posted: December 8th, 2022

# A firm can use three different production technologies

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

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TECH. 1 TECH. 2 TECH.3
Daily Output K L K L K L
100 3 7 = 10 4 5 = 9 5 4 = 9
150 3 10 = 13 4 7 = 11 5 5 = 10
200 4 11 = 15 5 8 = 13 6 6 = 12
250 5 13 = 18 6 10 = 16 7 8 = 15

a. Suppose the firm is operating in high-wage country, where capital cost is \$100 per unit per day and labor cost is \$80 per worker per day. For each level of output, which technology is cheapest?
b. Now suppose the firm is operating in a low-wage country, where capital cost is \$100 per unit per day but labor cost is only \$40 per unit per day. For each level of output, which technology is cheapest?
c. Suppose the firm move 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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