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.
a) Technique B is technologically inefficient. It requires more labor and more capital than technique C to produce a given output. All other techniques are technologically efficient.
b) Economic efficiency occurs when the firm produces a given output at the least cost. Technique D has the lowest cost and therefore is economically efficient.
c) With the change in costs, the economically efficient method of production changes. The company will now use a more labor intensive technique A, which, with the lower labor cost, becomes the economically efficient method.
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Indicate whether the statement is true or false
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