The table below contains information on three techniques for producing $15 worth of bar soap. Assume â$17.50 worth of bar soapâ means the selling price of soap is $3.50 per bar and all three techniques produce 5 bars of soap ($17.50 = $3.50 per bar à 5 bars). So you know each technique produces 5 bars of soap
Units of Resource Technique 1 Technique 2 Technique 3 Resource 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
a. What technique will you want to use if the price of a bar of soap falls to $3.25? (Click to select)Technique 1Technique 2Technique 3.
What if the price of a bar of soap rises to $4.75? (Click to select)Technique 1Technique 2Technique 3.
What if the price of a bar of soap rises to $5.75? (Click to select)Technique 1Technique 2Technique 3
b. How many bars of soap will you want to produce if the price of a bar of soap falls to $2.45?
Zero: It is not profitable to produce bars of soap at this selling price Five: It is profitable to produce bars of soap at this selling price
c. Suppose that the price of soap is again $3.50 per bar but that the cost of all four resources are now $1.3 per unit. Which is now the least-profitable technique? (Click to select)Technique 1Technique 2Technique 3.
d. If the resource prices return to their original levels (the ones shown in the table), but a new technique is invented that can produce 2.57 bars of soap using 1 unit of each of the four resources, will firms prefer the new technique?
The table below contains information on three techniques for producing $15 worth of bar soap. Assume â$17.50 worth of bar soapâ means the selling price of soap is $3.50 per bar and all three techniques produce 5 bars of soap ($17.50 = $3.50 per bar à 5 bars). So you know each technique produces 5 bars of soap
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a. What technique will you want to use if the price of a bar of soap falls to $3.25? (Click to select)Technique 1Technique 2Technique 3.
What if the price of a bar of soap rises to $4.75? (Click to select)Technique 1Technique 2Technique 3.
What if the price of a bar of soap rises to $5.75? (Click to select)Technique 1Technique 2Technique 3
b. How many bars of soap will you want to produce if the price of a bar of soap falls to $2.45?
Zero: It is not profitable to produce bars of soap at this selling price | |
Five: It is profitable to produce bars of soap at this selling price |
c. Suppose that the price of soap is again $3.50 per bar but that the cost of all four resources are now $1.3 per unit. Which is now the least-profitable technique? (Click to select)Technique 1Technique 2Technique 3.
d. If the resource prices return to their original levels (the ones shown in the table), but a new technique is invented that can produce 2.57 bars of soap using 1 unit of each of the four resources, will firms prefer the new technique?