Final answer:
When the cost of machinery increases to $55, the firm must recalculate the total costs for each production method to determine which to use; the choice often favors the least costly method, potentially with more machines if labor conflicts are a concern.
Step-by-step explanation:
The question pertains to a business decision regarding production methods. If the cost of machines increases to $55 while the cost of labor remains at $40, it will impact the total cost of various production methods. A firm, especially one faced with union pressures, might consider shifting towards a capital-intensive production method to reduce reliance on labor and increase productivity.
The decision on which method to choose after the cost increase would be dependent on the new total costs for each method, where each method's total cost can be calculated by multiplying the number of required machines and labor hours by their respective new costs. For instance, if a firm can produce a home exercise cycle in three different ways using a combination of labor and machines, the method with the lowest total cost (considering increased machinery cost) would generally be preferred. This may sometimes lead to a preference for more machines due to factors such as reduced conflict with labor unions.