Final answer:
Customized production or job production is the technology that creates goods in small batches to customer specifications, requiring a mix of labor and physical capital to optimize costs.
Step-by-step explanation:
The type of production technology that produces goods in small batches, often one or a few products, designed specifically to customer specifications is known as customized production or job production. This approach is in contrast to mass production, where goods are made in large quantities and standard designs. Customized production tends to have higher costs per unit because of the manual labor involved and the lower economies of scale.
Firms often face the decision of choosing the appropriate mix of labor and physical capital to find the most cost-effective production technology. This might involve selecting between multiple small machines operated by workers, versus one larger machine that is more automated and requires fewer workers. The choice is driven by the goal of reducing costs to maximize profits, while remaining competitive by offering lower prices than rivals.
After selecting the production technology, firms also need to consider the optimal scale of production. As industries experience economies of scale, the cost per unit tends to decrease with increased output. This principle is what allows larger factories, much like Costco or Walmart, to produce goods at a lower average cost than smaller factories.