Macroeconomics 20th Edition by Campbell McConnell ,Stanley Brue ,Sean Flynn

Exercise 22

Table 2.1 contained information on three techniques for producing $15 worth of bar soap. Assume that we said "$15 worth of bar soap" because soap cost $3 per bar and all three techniques produce 5 bars of soap ($15 = $3 per bar x 5 bars). So you know each technique produces 5 bars of soap. LO3
a. What technique will you want to use if the price of a bar of soap falls to $2.75? What if the price of a bar of soap rises to $4? To $5?
b. How many bars of soap will you want to produce if the price of a bar of soap falls to $2.00?
c. Suppose that the price of soap is again $3 per bar but that the prices of all four resources are now $1 per unit. Which is now the least-profitable technique?
d. If the resource prices return to their original levels (the ones shown in the table) but a new technique is invented that can produce 3 bars of soap (yes, 3 bars, not 5 bars!) using 1 unit of each of the four resources, will firms prefer the new technique?