Final answer:
Traditional manufacturing relies more on labor leading to higher labor costs, while computer-integrated manufacturing favors machinery, providing incentives to reduce labor costs. The cost structures shift as firms adapt to changes in the cost of labor, influencing long-term strategic decisions. This highlights the distinction between short-term and long-term cost analysis in production technologies.
Step-by-step explanation:
The cost structures in traditional manufacturing differ from those in computer-integrated manufacturing environments due to the varying proportions of labor and machinery involved. In traditional manufacturing, often referred to as Production technology 1, there is significant reliance on labor, with minimal use of machinery. This leads to higher labor costs and lower machinery costs. However, as computer-integrated manufacturing, indicated as Production technology 3, incorporates more advanced machinery and less labor, this balance shifts. With the rise in labor costs, as shown from example A to C, firms have a greater incentive to substitute labor with machinery, which is prevalent in computer-integrated contexts.
Understanding this shift underscores the evolution within manufacturing from labor-intensive to technology-intensive processes. The implications extend to cost analysis, highlighting the importance of long-term investments in machinery and the potential for reduced per-unit costs over time due to increased efficiency and lower variable costs associated with human labor. This transformative approach within industries such as automotive, software, and service sectors such as fast-food chains, reveal how production technologies adapt to cost variations.
Lastly, while examining cost structures, it's essential to consider how they vary in the short run versus the long run. Short-term costs may reflect current labor and machinery rates, whereas long-term cost structures may evolve due to changes in production processes, automation advancements, and shifts in market labor rates.