Question

Tee Ace Manufacturing Company has orders for three similar products. All three machines are available for the manufacturing operations, and they can produce all the products at the same productivity rate. How should the company efficiently allocate these machines to fulfill the orders?

Answer 1

To maximize efficiency and minimize costs, Tee Ace Manufacturing Company should choose the production technology that has the lowest total cost, balancing the use of machines and labor based on their relative costs.

Step-by-step explanation:

In determining the most efficient allocation of machines for the manufacturing of three similar products, Tee Ace Manufacturing Company should consider the production technology that offers the lowest total cost. The decision revolves around the trade-off between labor and machine hours. If machine hours become cheaper, as suggested for production technology 3, the firm would naturally shift towards using more machines and less labor due to the reduced cost of capital.

Conversely, if machine costs increase and labor remains comparatively cheaper, as indicated for production technology 2, the firm should favor using more labor and fewer machines. The concept is grounded in minimizing costs and maximizing efficiency in the production process. Thus, the best choice is contingent upon the relative costs of labor and capital for the specific technologies.