Refer to the information provided in Table 19.5 below to answer the questions that follow.
Capital and labor each cost $1 per unit. The firm produces 1,000 units of output.
Table 19.5
$$\begin{array} { | c | c c | }
& \begin{array} { c }
\text { Input } \
\text { Requirements } \
\text { per unit of } \
\text { Output }
\end{array} \
\text { Technology } & K& L \
\hline \text { A } & 5 & 2 \
\hline \text { B } & 3 & 5 \
\hline
\end{array}$$
-Refer to Table 19.5. Suppose the government imposes a 100% tax on capital. Which technology will the firm use?

Question

Refer to the information provided in Table 19.5 below to answer the questions that follow.
Capital and labor each cost $1 per unit. The firm produces 1,000 units of output.
Table 19.5
 $$\begin{array} { | c | c c | } 
& \begin{array} { c } 
\text { Input } \
\text { Requirements } \
\text { per unit of } \
\text { Output }
\end{array} \
\text { Technology } & K& L \
\hline \text { A } & 5 & 2 \
\hline \text { B } & 3 & 5 \
\hline
\end{array}$$
-Refer to Table 19.5. Suppose the government imposes a 100% tax on capital. Which technology will the firm use?

Quizplus · Accepted Answer

With a 100% tax on capital, the cost of using capital in Technology A becomes $2 per unit, while the cost of using capital in Technology B remains at $1 per unit. Hence, the firm will choose Technology B, as it is now the more cost-efficient option.

Refer to the Information Provided in Table 19 -Refer to Table 19