Question
Consider the following information in the table for Chloe's Restaurant and answer the questions below by using the cost minimization rule that takes into account
Consider the following information in the table for Chloe's Restaurant and answer the questions below by using the cost minimization rule that takes into account the marginal product per dollar of inputs of production.
Item | Cost |
Marginal Product of Capital | $10,000 |
Marginal Product of Labor | $500 |
Wage Rate | $15 |
Rental Price of Pizza Ovens | $600 |
- Is the owner of Chloe's Restaurant minimizing costs? Explain by computing marginal productivity per dollar using the data in the table.
- To increase productivity and lower costs of production, should Chloe rent more ovens and hire fewer workers, or rent fewer ovens and hire more workers? Explain.
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Foundations of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
10th Canadian edition
978-1259024979
