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A factory manager wants to maximize output. The factory can use either labour, machinery, or a mix of both. The manager has a budget of
A factory manager wants to maximize output. The factory can use either labour, machinery, or a mix of both. The manager has a budget of $500,000 to spend on inputs. The following table species how much output can be generated by each output for different spending levels. How much should the manager spend on labour and on machinery to maximize output? Explain using marginal reasoning. Assume the manager must spend using $50,000 increments. (3 marks) Spending Output from Labour Output from Machinery _ 0 0 $50,000 600 1,000 1,150 1,900 1,650 2.700 $200,000 2,100 3,400 $250,000 2,500 4,000 $300,000 2,850 4,500 $350,000 3,150 4,900 $450,000 3,600 5,400 $500,000 3,750 5,500
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