Assignment:
Production and Cost
Using some of the concepts you learned from the module, discuss the questions below.
In an effort to stop the migration of many of the automobile manufacturing facilities from the Detroit area, Detroit's City Council is considering passing a statute that would give investment tax credits to automobile manufacturers. This would reduce auto manufacturer's costs of using capital and high tech equipment in their production processes.
- As a local union representative you voice your opposition to the statute. Outline the basis of your arguments as a union representative (Hint: consider the impact that the investment tax credit would have on the capital/labor ratio as a result of the increase in the price of capital/price of labor ratio).
- As a representative for one of the automakers, how would you counter the arguments of the union representative?