A Mining Company Made Some Changes to Their Mining Process

question 32

Essay

A mining company made some changes to their mining process in an attempt to save fuel. Before the changes were made, it took an average of 20 gallons of diesel fuel to mine 1,000 pounds of copper. Suppose the standard deviation of fuel used per 1,000 pounds of copper mined is 6 gallons. After the changes were made, the company only used an average of 18 gallons of diesel for the next 30,000 pounds of copper mined.
A) How unusual would it be to get a sample average of 18 gallons or less for 30,000 pounds of copper mined if the changes to the mining process had no effect?
B) Do you think the changes in the mining process actually lowered the fuel used? Explain.

• A) How unusual would it be to get a sample average of 18 gallons or less for 30,000 pounds of copper mined if the changes to the mining process had no effect?
• B) Do you think the changes in the mining process actually lowered the fuel used? Explain.

---

Definitions:

Utility Function

A mathematical model that represents a consumer's preference ranking over bundles of goods or outcomes, quantifying the level of satisfaction or happiness derived.

Budget Constraint

Represents the combinations of goods and services that a consumer can afford to purchase given current prices and their income level.

Relative Prices

Relative prices represent the price of one good or service in comparison to another, expressing the trade-off between different goods in an economy.

Slutsky Version

Pertains to the Slutsky equation in economics, which shows how changes in price affect consumer demand, separating the substitution effect from the income effect.