Final answer:
Ball Bearings Inc should choose the production technology with the lowest total cost, initially technology 3 with cheaper machine hours and later technology 2 as machine costs increase. They should produce 3 cases if demand allows, but if faced with insufficient demand, as historical context suggests, the firm might have to reduce production or even shut down.
Step-by-step explanation:
When a firm evaluates its costs of production, it must consider the cost-effectiveness of different production technologies.
Ball Bearings Inc is faced with such a decision, needing to select the technology that allows them to minimize total costs while considering the market demand and their production capacity.
Based on the information provided, we understand that at one point, production technology 3 would have been the ideal choice due to the lowest total cost.
This would be logical when the cost of machine hours is cheaper, indicating a shift towards more machine usage and less labor. However, subsequently, production technology 2 becomes the preferred option when the cost of machines increases, necessitating a shift towards more labor.
If we also consider the historical context—as mentioned for the United States in the 1970s—where there's not enough demand for all firms to operate efficiently at the bottom of the average cost curve, a firm must carefully assess its viability.
In such a scenario, with only enough demand for 2.5 firms, a company might either 'shut down its business' or find ways to survive while struggling.
In conclusion, the correct decision for Ball Bearings Inc, considering the costs and demand situation described, would likely be to produce 2 cases of ball bearings, aligning with the technology offering the lowest total cost at the time of analysis.
However, it's important to note that sometimes it may be more sensible to cease operations if the firm cannot produce output cost-effectively.
Therefore, the firm should c) produce 3 cases of ball bearings when production technology 3 has the lowest total cost, or shift to b) produce 1 case of ball bearings with the changed cost structure favoring production technology 2.