Resource Units Required Price per unit of resource Resource 1 Technique 2 3

Labor Land Capital Entrepreneurial ability

$3 4 2 2

5 2 2 4

2 4 4 2

3 2 5 4

Technique 1 Labor Land Capital Entrepreneurial ability Total

Price Per Unit 3 4 2 2 5 2 2 4 15 8 4 8 35

Technique2 Labor Land Capital Entrepreneurial ability Total

Price Per Unit 3 4 2 2 2 4 4 2 6 16 8 4 34

Technique3 Labor Land Capital Entrepreneurial ability Total

Price Per Unit 3 4 2 2 3 2 5 4 9 8 10 8 35

A. Technique 2. Because it produces the output with least cost Reason: ($34 as compared to $35 each for the other two) Profit will be $6 ($40-$34), which will result the company and industry to expand. Expansion in this industry will continue until prices decline to where total revenue equals total cost of $34 and no additional firms will want to enter the industry.

B. We will adopt technique 4 because its cost is now lowest at $32. Technique4 Labor Land Capital Entrepreneurial ability Total Price Per Unit 3 4 2 2 2 2 6 3 6 8 12 6 32

C. Technique 1 is recommended in this case because its cost is now lowest at $27.50 D. The prices will increase due to the Scarcity of resources and the Company ignoring higher resource costs will become high-cost producers of the goods and will be pushed out of business by other firms switching to the less expensive resources. The market system forces producers to conserve on the use of highly scarce re-sources.

No. Purchase price and the profit sharing create doubtful incentive from the companys pint of view. The details are as under The Vice president keeps $0.75 of each dollar earned up to $150,000, but only $0.10 of each dollar earned after $150,000. Since earning more requires increasing marginal effort, the Vice president has little incentive to earn more than $150,000. And every dollar the Vice president earns raises the price that he will eventually pay for the company by $4.50, effectively penalizing him for increasing company profitability Conclusion: This is not suitable incentive plan from companys point of view and Vice presidents point of view.