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Chapter 21 Answers
Chapter 21 Answers
Chapter 21 Answers
Individual activities
No. of machines No. of workers Output per worker
(average product)
4 1 10
4 2 12
4 3 15
4 4 18
4 5 20
4 6 18
4 7 16
The most efficient combination of workers and machines is 4 machines and 5 workers.
2 a
Rising living standards tend to increase demand for water significantly. More water is
demanded for a variety of purposes including washing, watering gardens, cleaning cars, filling 1
swimming pools, processing food and other industrial uses.
b As living standards in most countries should rise in the future, demand for water is likely to
increase, which will cause its price to rise as shown in the diagram below. Supply will extend
as water companies will have a financial incentive to collect more rain in reservoirs, dam more
rivers and desalinate sea water.
Price of
D1
water
D S
P1
P
D1
D
S
0 Q Q1 Quantity
of water
3 a
A piecework model is a method of paying workers on the basis of amount of output produced
by them.
b i It may increase output as workers will spend less time travelling to and from work.
Thus, they may start working earlier and finish later. However, there is some risk that,
without supervision, they may reduce their effort and output but a piecework model may
overcome this limitation.
ii Costs should be reduced as the firm will not need much space to accommodate workers.
Some rooms may be required for meetings and key staff but considerably less factory or
office space and less car parking space would be required. This saving should be greater
than any rise in communication costs, which, given advances in technology, should be low.
Four-part question
a Investment is spending on capital goods.
b The production of cars may increase if there is a rise in demand for cars. In the short term, car
firms may make more cars by asking existing workers to work overtime. Working longer hours
may reduce output per worker hour as the workers may become tired and so may not be able to
put so much effort in their work. In the longer term, the car firms may employ more workers. If
these workers are less skilled than the original workers employed, labour productivity will fall.
c Car production has become more capital-intensive because advances in technology have
significantly increased the range of tasks that can be completed by machinery with the minimum
of human supervision. Capital equipment has increased the number of cars that can be produced
in a given time period and has reduced the cost of production. Relying more on capital equipment
has also improved the reliability of the cars produced by reducing human error. Lower costs of
production and higher revenue have encouraged car firms to spend more on capital goods.