Question

Suppose a new production method will be implemented if a hypothesis test supports the conclusion that the new method reduces the mean operating cost per hour. What is the purpose of implementing the new production method?

1) To increase the mean operating cost per hour
2) To maintain the same mean operating cost per hour
3) To reduce the mean operating cost per hour
4) To have no effect on the mean operating cost per hour

Answer 1

The new production method aims to reduce the mean operating cost per hour, aligning with the goal of improved cost efficiency and profitability in production.

Step-by-step explanation:

The purpose of implementing a new production method in a firm, as indicated by the hypothesis test, is to reduce the mean operating cost per hour. This initiative is closely aligned with the goal of achieving cost efficiency in production technology. By reducing the mean operating costs, the firm is looking to shift towards a production technology that is more machine intensive and less labor-intensive, optimizing the use of resources and potentially increasing profitability.