Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A bottling company uses two inputs to produce bottles of the soft drink Sludge: bottling machines (K) and workers (L). The isoquants have the usual

image text in transcribed

image text in transcribed
A bottling company uses two inputs to produce bottles of the soft drink Sludge: bottling machines (K) and workers (L). The isoquants have the usual smooth shape. The machines cost $1,000 per day to run (r), and the workers earn $200 per day (w). At the current level of production, the marginal product of machines (MP, ) is an additional 347 bottles per day, and the marginal product of labor (MP ) is 25 more bottles per day. Is this firm producing at minimum cost? If it is minimizing cost, explain why. If it is not minimizing cost, explain how the firm should change the ratio of inputs it uses to lower its cost. The bottling company O A. is minimizing the cost of production because MPk/r = MP_/w. O B. is not minimizing the cost of production because MP /r> MP, /w and should use more labor and fewer machines. O C. is not minimizing the cost of production because MP /MP| = r/w and should use more labor and fewer machines. O D. is not minimizing the cost of production because MPk/r > MP, /w and should use less labor and more machines. O E. is not minimizing the cost of production because MP /r

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Microeconomics Principles For A Changing World

Authors: Eric Chiang

4th Edition

1464186677, 978-1464186677

More Books

Students also viewed these Economics questions

Question

2. Develop a good and lasting relationship

Answered: 1 week ago

Question

1. Avoid conflicts in the relationship

Answered: 1 week ago