3. You run a company that manufactures office chairs. You determine that one additional hour of...
3. You run a company that manufactures office chairs. You determine that one additional hour of labor alone would increase chair production by 30 per week. Alternatively, one additional hour of machine time alone would increase chair production by 2 per week. The price of labor is $10 per hour. The price of machine time is $0.75 per hour. Is your firm using an optimal amount of labor and machinery? If not, should you use more or less machine time in your production process? Explain
Homework Answers
Price of labor is $10 per hour which can produce 30 extra chairs which means that cost of producing 3 chairs is $1 or 1 chair is $0.33.
While the cost of producing 2 chairs is $0.75 with machinery which means $0.375 for 1 chair.
If we are calculating an optimal amount, we can reduce the chairs produced by machine alone because from machine it is costing $0.045 extra per chair. This may not make any difference for one chair but will sure make for a bulk production.
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3. You run a company that manufactures office chairs. You
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