A fast food restaurant currently pays $5 per hour for servers and $50 per hour to rent ovens and other kitchen machinery. The restaurant uses seven hours of server time per unit of machinery time.
Write down the iso-cost equation for the restaurant. Determine whether the restaurant is minimizing its cost of production when the ratio of marginal products (capital to labor) is 12. If not, what adjustments are called for to improve the efficiency in resource use?