1. Table 2.1 contains information on three techniques for producing

$15 worth of bar soap. Assume that we said “$15 worth of bar soap” because soap cost $3 per bar and all three techniques produce 5 bars of soap ($15 5 $3 per bar 3 5 bars). So you know each technique produces 5 bars of soap. LO3

a. What technique will you want to use if the price of a bar of soap falls to $2.75? What if the price of a bar of soap rises to $4? To $5?

b. How many bars of soap will you want to produce if the price of a bar of soap falls to $2.00?

c. Suppose that the price of soap is again $3 per bar but that the prices of all four resources are now $1 per unit.

Which is now the least-profitable technique?

d. If the resource prices return to their original levels (the ones shown in the table) but a new technique is invented that can produce 3 bars of soap (yes, 3 bars, not 5 bars!) using 1 unit of each of the four resources, will firms prefer the new technique?