Final answer:
The selection of an automatic insertion machine should be based on the machine offering the lowest total cost. Production technology 3 is preferred when machine costs are low, whereas production technology 2 is better when machine costs are high. Historical context shows that such economic shifts can result in market consolidation as in the US during the 1970s.
Step-by-step explanation:
When a company contemplates the introduction of an automatic insertion machine, the decision-making process involves a careful analysis of options to identify the machine with the lowest total cost. The choice between production technologies is often influenced by the relative costs of labor and capital.
In scenarios where machine hours become more cost-effective, the rational choice is to lean towards a technology that utilizes more machines and less labor. This preference is reflected in selecting production technology 3, emphasizing automation and efficiency. Automation reduces reliance on manual labor, optimizing production processes and potentially lowering costs associated with wages and human resources.
Conversely, if the cost of machines increases relative to labor, the firm may adjust its strategy by choosing a technology that demands less capital and involves more labor. In such a scenario, production technology 2, which relies more on human labor, becomes a more viable option. This strategic choice ensures adaptability to the prevailing economic conditions and cost structures.
A historical example of this decision-making process occurred in the United States during the 1970s when there was insufficient demand for all firms to operate efficiently. This economic landscape led to industry consolidation, where companies adapted by choosing production technologies that aligned with the prevailing cost dynamics, whether favoring labor or capital-intensive approaches. The ability to flexibly adjust technology choices based on the cost environment remains a critical aspect of strategic decision-making in manufacturing and reflects the economic principle of optimizing total costs for sustainable competitiveness.