1 / 2

Managerial Economics Least-Cost Production

Managerial Economics Least-Cost Production.

robin-francis
Download Presentation

Managerial Economics Least-Cost Production

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Managerial Economics Least-Cost Production Suppose a firm is currently using 500 laborers and 325 units of capital to produce its product. The wage rate is $25, and the price of capital is $130. The last laborer adds 25 units to total output, while the last unit of capital adds 65 units to total output. Is the manager of this firm making the optimal input choice? Why or why not? If not, what should the manager do? Dr. C. Chen

  2. Managerial Economics Least-Cost Production Suppose a firm is currently using 500 laborers and 325 units of capital to produce its product. The wage rate is $25, and the price of capital is $130. The last laborer adds 25 units to total output, while the last unit of capital adds 65 units to total output. Is the manager of this firm making the optimal input choice? Why or why not? If not, what should the manager do? The information provides MPL = 25; w (wage) = $25; MPK = 65; r (price of capital) = $130. MPL / w > MPK / r Labor is more productive given each dollar spent The choice is not optimal yet because MPL / w  MPK / r The manager should hire more labor to reach the least-cost Dr. C. Chen

More Related