Reference no: EM131574664

Problem -

Assuming that a firm Carlo & Gary, Inc. can use three different production technologies with distinct capital and labor requirements at each level of output as follows:

Daily Output       Technology 1           Technology 2       Technology 3

                             K         L                K         L              K         L         

100                         3          7              4          5             5          4

150                         3          10            4          7             5          5

200                         4          11            5          8             6          6

1) If the firm operates in the US (a high-wage country) where capital cost is $50.00 per unit and labor cost is $40.00 per worker per day, which technology is cheaper?

2) Now, suppose that the firm moves to Haiti (a low-wage country) to reduce its labor cost per unit per day by half (capital cost does not change). Which technology is cheaper?

3) After moving to Haiti, Carlo & Gary Inc. wants to maintain its level of output at 200 units per day. How will its total employment change?

4) Is it a cost saving move?