Example B: Workers cost $55, machines cost $80

Labor Cost

Machine Cost

Total Cost

Cost of technology 1 10 × $55 = $550 2 × $80 = $160 $710

Cost of technology 2

7 × $55 = $385 4 × $80 = $320 $705

Cost of technology 3

3 × $55 = $165 7 × $80 = $560 $725

Example C: Workers cost $90, machines cost $80

Labor Cost

Machine Cost

Total Cost

Cost of technology 1 10 × $90 = $900 2 × $80 = $160 $1,060

Cost of technology 2

7 × $90 = $630 4 × $80 = $320 $950

Cost of technology 3

3 × $90 = $270 7 × $80 = $560 $830

TABLE 7.14 Total Cost with Rising Labor Costs

Example A shows the firm’s cost calculation when wages are $40 and machines costs are $80. In this case,

technology 1 is the low-cost production technology. In example B, wages rise to $55, while the cost of machines

does not change, in which case technology 2 is the low-cost production technology. If wages keep rising up to
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