High School

Capital & Labor requirement:
Steel (S) Capital (K) 2 machines Labor (L) 8 workers Bread (B) 1 machine 8 workers
Steel is intensive in
(a).Labor
(b).Capital
(c).Can't tell; Not enough information
(d).both in capital and labor

Answer :

Final answer:

Steel production is capital intensive, utilizing a higher ratio of machines to labor than bread production. Firms choose production technologies that minimize total costs, which can lead to shifts towards more labor or capital-intensive methods, depending on relative costs and productivity.

Explanation:

When we look at the capital and labor requirements for producing steel and bread, it is evident that steel uses more machines relative to labor compared to bread. For steel production, 2 machines and 8 workers are required, whereas bread production requires 1 machine and the same number of workers. This indicates that steel is more capital intensive than bread since it requires a higher number of machines per worker. In the broader context of production technology decisions, firms tend to choose the technology that minimizes their total cost. If the cost of machines increases, firms may shift towards using more labor-intensive technology, as this would have a lower total cost in comparison to a more capital-intensive production process.

Changes in labor costs can also affect these decisions. For example, an increase in wages due to union negotiations could lead to a firm opting for production methods that are less labor-intensive to reduce costs. When considering what production technology to use, overall, factors such as machine costs, labor costs, and productivity must all be weighed to determine the most cost-effective combination.

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