-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.
Definitions:
Competitive Market
A market structure characterized by a large number of buyers and sellers, where each has a negligible impact on market price.
Marginal Revenue
The additional income that will be generated by increasing product sales by one unit.
Quantity Demanded
The amount of a good or service that consumers are willing to purchase at a given price at a specific time.
Total Revenue
The total receipts from sales of goods or services provided by a company.
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