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Resources Required Price per Technique 1 Technique 2 Technique 3 Unit of Units Units Units Resource Resource W $2 2 N Land 2 Labor $4 W Capital 1 2 Entrepreneurial $5 Ability Suppose there are three techniques for producing 1 wool blanket, as shown in the table above. a. With the resource prices shown, which production technique will the firm use? Why? b. Suppose the firm can sell blankets for $26 each. Will the firm be profitable? c. Assume a new technique, call it Technique 4, is developed that economizes on the relatively expensive labor. It requires 2 units of land, 1 unit of labor, 3 units of capital, and 1 unit of entrepreneurial ability. Will the firm adopt this new technique? d. Suppose the firm's cost of capital rises to $5, all other values being the same. Which technique will the firm now choose? Goran M. Muhamad Principles of Economics 26