Management predicts that if the strike is successful

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Q. The Mor-Tex Company assembles garments entirely by hand even though a textile machine exists that can assemble garments faster than a human can. Workers cost $50 per day also each additional worker can manufacture200 more units per day (i.e., marginal product is constant also equal to 200). Installation of the 1st textile machine on the assembly line will increase output by 1,800 units daily. Currently the firm assembles 5,400 units per day.

a. The financial analysis department at Mor-Tex estimates that the cost of a textile machine is $600 per day. Can management reduce the cost of assembling 5,400 units per day by purchasing a textile machine also Utilizing less worker? Elucidate why or elucidate why not?

b. The Textile Workers of America is planning to strike for higher wages. Management predicts that if the strike is successful the cost of worker will increase to $100 per day. If the strike is successful, how would this affect the decision in part to purchase a textile machine? Explain.

Reference no: EM1321681

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