A dressmaker can sew 500 garments with 140 bolts of fabric and 2,000 hours of la

Question

A dressmaker can sew 500 garments with 140 bolts of fabric and 2,000 hours of labor. Another dressmaker can sew 500 garments with 120 bolts of fabric and 2,500 hours of identical labor. Fabric costs $120 a bolt and labor costs $25 an hour.

Is it possible for both methods to be technically efficient? Why or why not?

A) Yes, because both dressmakers make the same number of garments.

B) No, because the first dressmaker uses 2,000 hours of labor while the second dressmaker uses 2,500 hours of labor. This means that the first dressmaker has higher productivity and therefore is the only one who is technically efficient.

C) Yes, because neither dressmaker is using more of both inputs to produce the same number of garments.

D) No, because the cost of the garments for the first dressmaker is $66,800. The cost of the same number of garments for the second dressmaker is $76,900. Therefore, the first method is technically efficient.

Is it possible for both methods to be economically efficient? Why or why not?

A) No, because the second method has lower total costs of production.

B) Yes, because even though their costs differ, the higher-cost dressmaker may be able to sell the garments at a higher price.

C) No, because the first method has lower total costs of production.

D) Yes, because the dressmakers will sell the garments for the same price.

Explanation / Answer

D) No, because the cost of the garments for the first dressmaker is $66,800. The cost of the same number of garments for the second dressmaker is $76,900. Therefore, the first method is technically efficient.

C) No, because the first method has lower total costs of production.

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