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August 20, 2014

Homework Help: Managerial Economics

Posted by Lil on Friday, February 4, 2011 at 5:46pm.

The Largo Publishing House uses 400 printers (workers) and 200 printing presses to produce books. A printer's wage rate is $20 per hour and the price per hour of a printing press is $5,000. The last printer hired added 20 books (per hour) to total output, while the last printing press added 1000 books (per hour) to total output. Is the publishing house making the optimal input choice? If not, how should the manager of Largo Publishing House adjust input usage?
Answer

A. No, the publisher is not making the optimal input choice. The publisher should use less of both inputs because the MP of each one is declining.

B. No, the publisher is not making the optimal input choice. The publisher should use more of both inputs in order to benefit from economies of scale.

C. No, the publisher is not making the optimal input choice. The publisher should use more printing press hours and fewer printer hours to produce at the same rate of output.

D. Yes, the publisher is making the optimal input choice.

E. No, the publisher is not making the optimal input choice. The publisher should use more labor hours and fewer printing press hours to produce at the same rate of output.

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