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Q. Wine production
In wine production, raw materials (grapes) are the single biggest cost. The cost of the grapes may be as much as 60% of total production costs but varies greatly from lower-quality inexpensive wines to the highest quality wines. The second-highest cost for many vintners is the barrels used to ferment the wine. French oak barrels cost as much as $700 apiece as well as last only a few years. The other major production cost, other than the actual physical plant where the winemaking occurs, is time. Quality wines spend 2-2 ½ years aging in barrels as well as then an additional 8 months in bottles before being ready for sale.
(a) How much substitutability do you assume exists between inputs in winemaking? How might this factor affect efforts to cut costs?
(b) If a firm were to find a new technology that cut the required.
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