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Chapter 7: Q 24. (page 184)

What is a production technology?

Short Answer

Expert verified

A production technology is a mix of capital and labor that is used to make a product.

Step by step solution

01

Step 1. Introduction

Production technology is defined as the technology utilized to manufacture a product.

As a result, it is viewed as a system for scheduling products production and controlling stocks in order to reduce costs.

Businesses in the manufacturing industry use it to discover production constraints.

02

Step 2. Explanation

Production technology is defined as the technology utilized to manufacture a product.

As a result, it is viewed as a system for scheduling products production and controlling stocks in order to reduce costs.

Businesses in the manufacturing industry use it to discover production constraints.

A production technology is a mix of capital and labor that is used to make a product. SUPPLY DETERMINANT PRODUCTION TECHNOLOGY is defined as the suppliers' knowledge and information about production (that is, the producing techniques or the way the inputs are linked together to form the outputs), which are assumed to be constant while constructing a supply curve.

A drop in technology means that producers can sell fewer units of a product.

This is demonstrated with the help of the diagram below:

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Most popular questions from this chapter

Which costs are measured on per-unit basis: fixed costs, average cost, average variable cost, variable costs,

and marginal cost?

How would an improvement in technology, like the high-efficiency gas turbines or Pirelli tire plant, affect the long-run average cost curve of a firm? Can you draw the old curve and the new one on the same axes?

Average cost curves (except for average fixed cost) tend to be U-shaped, decreasing and then increasing. Marginal cost curves have the same shape, though this may be harder to see since most of the marginal cost curve is increasing. Why do you think that average and marginal cost curves have the same general shape?

Are fixed costs also sunk costs? Explain.

A small company that shovels sidewalks and driveways has 100 homes signed up for its services this winter. It can use various combinations of capital and labor: intensive labor with hand shovels, less labor with snow blowers, and still less labor with a pickup truck that has a snowplow on front. To summarize, the method choices are:

Method 1: 50 units of labor, 10 units of capital ; Method 2: 20 units of labor, 40 units of capital ; Method 3: 10 units of labor, 70 units of capital

If hiring labor for the winter costs \(100/unit and a unit of capital costs \)400, what is the best production method? What method should the company use if the cost of labor rises to $200/unit?
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