Assume that you are the owner of a company. You pay $20 per hour to your...

 

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Assume that you are the owner of a company. You pay $20 per hour to your workers. You do not have enough capital to purchase machines and therefore you choose to rent them. On average you pay $100 per hour per machine. The marginal product of a machine is 25 and the marginal product of a worker is 6. Under these conditions, are you minimizing your cost of production? If the demand for your product goes up a bit, should you rent an extra machine? Explain. Assume that you are the owner of a company. You pay $20 per hour to your workers. You do not have enough capital to purchase machines and therefore you choose to rent them. On average you pay $100 per hour per machine. The marginal product of a machine is 25 and the marginal product of a worker is 6. Under these conditions, are you minimizing your cost of production? If the demand for your product goes up a bit, should you rent an extra machine? Explain.

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To determine if you are minimizing your cost of production we need to consider the marginal cost of ... View the full answer