and sell for less.

Choice of Production Technology

A firm can perform many tasks with a range of combinations of labor and physical capital. For example, a firm

can have human beings answering phones and taking messages, or it can invest in an automated voicemail

system. A firm can hire file clerks and secretaries to manage a system of paper folders and file cabinets, or it

can invest in a computerized recordkeeping system that will require fewer employees. A firm can hire workers

to push supplies around a factory on rolling carts, it can invest in motorized vehicles, or it can invest in robots

that carry materials without a driver. Firms often face a choice between buying a many small machines, which

need a worker to run each one, or buying one larger and more expensive machine, which requires only one or

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