Question

3. Suppose to clean dirty apartments, Abhay can hire labour for $30 an hour or borrow cleaning capital (vacuum and other machines) for $15 an hour. One dirty apartment can be cleaned using 4 hours of labour or capital in any combination a) If Abhay is currently using 3 hours of labour for each hour of machine time, is he minimizing total costs? If not, how can he improve the situation? b) Draw the isoquant and the isocost lines for the current and optimal combination of labour and capital

Answer 1

wage 30 per hour Bent - $15 per har If Abhay currently using & hours of labor for each how & eo and one... 1 hour of machine & 4 hur of labor Rest of I hur machine - 115 wage of a hur labor - 890 machine time.. Total Cat Total cost 45+ the $ 135 15+ 690 = $105 Instead if he wereld ude 3 hours of machine and a hour of Jabur Tutal cost = ($15) (3) + 6 (130) (1) Totat cost = $75 (This Comlinshon can improve situation Current Srtuahim is not minimizing total cust. H otel Rohelistin Captur- te & optimal - current situation T wh-1-1 T uwit Tabor