two workers to operate it. In short, physical capital and labor can often substitute for each other.

Consider the example of local governments hiring a private firm to clean up public parks. Three different

combinations of labor and physical capital for cleaning up a single average-sized park appear in Table 7.13.

The first production technology is heavy on workers and light on machines, while the next two technologies

substitute machines for workers. Since all three of these production methods produce the same thing—one

cleaned-up park—a profit-seeking firm will choose the production technology that is least expensive, given the

prices of labor and machines.

Production technology 1 10 workers 2 machines

Production technology 2 7 workers

4 machines

Production technology 3 3 workers

7 machines

TABLE 7.13 Three Ways to Clean a Park

Production technology 1 uses the most labor and least machinery, while production technology 3 uses the least
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