Hieber Company Produces Pants That Use Two Inputs-Materials and Labour

question 131

Essay

Hieber Company produces pants that use two inputs-materials and labour.During the past quarter,1,000 units were produced,requiring 2,000 kilograms of material and 1,000 hours of labour.An engineering efficiency study commissioned by the local university revealed that Hieber Company can produce the same output of 1,000 units using either of the following two combinations of inputs:
$\begin{array}{cccc}& \text { Materials } & \text { Labour } \\\text { Combination A } & 1,750 & 875 \\\text { Combination B }& 2,000 & 750\end{array}$ The cost of materials is $2.50 per kilogram; the cost of labour is $5 per hour.
a.Compute the productivity ratio for each input of Combination A.
b.Does this represent a productivity improvement over the current use of inputs?
c.What is the total dollar value of the improvement? Classify this as a technical or input trade-off efficiency improvement.

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Definitions:

Indifference Curve

A graph that shows combinations of two goods between which a consumer is indifferent, reflecting equal levels of utility for the consumer.

Total Utility

The total satisfaction or benefit received by consuming a given total amount of a good or service.

Money Income

The total amount of monetary earnings or revenue received by an individual or entity, usually measured within a specific period.

Slope

The measure of the steepness or incline of a line, indicating the rate at which y values change with respect to x values.