Question

A local restaurant is expanding. The manager needs to decide whether to hire new employees or...

A local restaurant is expanding. The manager needs to decide whether to hire new employees or purchase more machines (capital). You know that employees cost $20/hour and produce about 30 more units of output (marginal product of labor) per hour. You know that machines cost about $10/hour and produce about 15 more units of output (marginal product of capital) per hour. The manager should...

Expand by hiring more employees but no more machines.

Expand by purchasing more machines but no more employees.

Expand by hiring new employees and purchasing new machines at roughly the same ratio that we already have. Workers and machines are equally as productive per dollar spent.

Not enough information to answer this question.
Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1


Price of labor (PL) = $20

Marginal product of labor (MPL) = 30

So,

MPL/PL = 30/20 = 1.5

Price of capital (PK) = $10

Marginal product of capital (MPK) = 15

So,

MPK/PK = 15/10 = 1.5

It can be seen that,

MPL/PL = MPK/PK

This implies that the manager should expand by hiring new employees and purchasing new machines at roughly the same ratio that we already have. Workers and machines are equally as productive per dollar spent.

Hence, the correct answer is the option (3).

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
4. True or False: Profit-maximizing firms will hire a resource only if they can make money...
4. True or False: Profit-maximizing firms will hire a resource only if they can make money by doing so. A) True B) False 5) True or False: In a market economy, each resource will tend to be paid according to its marginal revenue product. Highly productive resources will command low prices, whereas less productive resources will command higher prices. A) True B) False 6) A dressmaker uses labor and capital (sewing machines) to produce dresses in a competitive market. Suppose...
The sales representative for a manufacturer of a new product claims that the product will increase...
The sales representative for a manufacturer of a new product claims that the product will increase output per machine by more than 29 units per hour. A line manager installs the product on 20 of the machines, and finds that the average increase was 31 with a standard deviation of 6.2. Using ? = .05, is there evidence that the population mean increase in output is greater than 29 units per hour? Do a complete and appropriate hypothesis test.
The table below represents a production schedule for Quincy’s Quiche Corner, a restaurant in a mall...
The table below represents a production schedule for Quincy’s Quiche Corner, a restaurant in a mall that sells quiches. Assume Quincy’s operates in a perfectly competitive environment (in both input and output markets), so it is both a price-taker and a wage-taker. a) Fill in the missing values in the table, assuming the selling price per quiche is $3.     Workers   Output (quiches)    Marginal Product Value of Marginal Product                                 0                 0                                  1                 10                         10                       $30...
3. A firm needs a new type of small appliance. The manager must decide whether to...
3. A firm needs a new type of small appliance. The manager must decide whether to purchase the appliance from a vendor at ten dollars per unit or to produce them in-house. The in-house process would have an annual fixed cost of $220,000 and a variable cost of eight dollars per unit. Determine the range of annual demand for which each of the alternatives would be best.
A firm produces an output with the production function Q=K*L2, where Q is the number of...
A firm produces an output with the production function Q=K*L2, where Q is the number of units of output per hour when the firm uses K machines and hires L workers each hour. The marginal product for this production function are MPk =L2 and MPl = 2KL. The factor price of K is $1 and the factor price of L is $2 per hour. a. Draw an isoquant curve for Q= 64, identify at least three points on this curve....
Body Covers is a firm that employs 100 workers and 50 units of capital to produce...
Body Covers is a firm that employs 100 workers and 50 units of capital to produce beanie hats, gloves, face masks, and scarves. The current wage rate is $10 per hour, the rental rate of capital is $21 per hour, and the firm is producing a total of 200 beanie hats, gloves, face masks and scarves per hour. If the marginal product of capital is 5 and the marginal product of labor is 3, then Body Covers could increase its...
A company introduced a new product into the market and is interested to know whether it...
A company introduced a new product into the market and is interested to know whether it has some market (monopoly) power. You are assigned to determine whether the company has a market power in the industry. You reviewed the available information about the company and you have learned that the company produces a somewhat unique product that sells for $12 per unit, and the marginal cost is $7.00. Does the company have a market power? Why? Explain to the manager...
1. Suppose a short-run production function is described as Q = 2L – (1/800)L^2 where L...
1. Suppose a short-run production function is described as Q = 2L – (1/800)L^2 where L is the number of labors used each hour. The firm’s cost of hiring (additional) labor is $20 per hour, which includes all labor costs. The finished product is sold at a constant price of $40 per unit of Q. a. How many labor units (L) should the firm employ per hour b. Given your answer in a, what is the output (Q) per hour...
passage require analysis and breakdown Workforce scheduling is huge in hospitals, especially at this time. An...
passage require analysis and breakdown Workforce scheduling is huge in hospitals, especially at this time. An influx of traveling nurses has sprouted from this pandemic due to the rates that hospitals are willing to pay for contracted employees to come in and help with the relief effort. With this, it is important to know the lengths of the contracts and the amount of capital it is going to take to secure each of the temporary employees. Form there, the needs...
Santana is a manager at a local Tex-Mex restaurant where she is responsible for the day...
Santana is a manager at a local Tex-Mex restaurant where she is responsible for the day to day operation of the restaurant. She has been tasked with several planning related duties in anticipation of the upcoming holiday season and the office parties that come with it. In previous years, decisions regarding ordering and staffing have been done using guess work and at times resulted in costly mistakes. This year, Santana has turned to you, Telfer School of Management Business Analytics...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT