Final answer:
The factory is considering a 'cost analysis' decision, evaluating potential production tech replacement based on changes in machine costs. A shift towards less capital and more labor, or vice versa, is expected depending on the cost of machine hours.
Step-by-step explanation:
The business decision being discussed when a small factory considers replacing its existing coining press is cost analysis. This decision revolves around evaluating the costs and benefits of acquiring new production equipment, including the potential for reduced production costs and increased efficiency. When the cost of machines increases, as mentioned, it affects the choice of production technology by influencing the mix of capital and labor used in production processes.
Businesses must often make decisions to expand or reduce production, choose their product pricing, open or close factories, hire or lay off workers, or start/stop selling products based on cost considerations. In response to increased machine costs, a firm might choose a technology that relies less on capital and more on labor (production technology 2), aiming to minimize expenses. Conversely, if machine hours become cheaper, a firm might adopt a technology that uses more machines and less labor (production technology 3), capitalizing on the lower costs.