3. More than one resource Aa Aa Kenji Kitano runs a surfing school on the North

Question

3. More than one resource Aa Aa Kenji Kitano runs a surfing school on the North Shore of Oahu. He has two inputs: surfboards, which he rents from a local shop for $15 per day, and surfing instructors, whom he hires for $60 per day. Kenji has figured out that the marginal revenue product (MRP) of the last instructor hired is $1,200, and the MRP of the last board used is $900 Which of the following statements is correct? O Kenji could lower his costs without reducing his output if he employed fewer instructors and used more O Kenji could lower his costs without reducing his output if he employed more instructors and used fewer O Any of these answers may be right, depending on the price of a lesson. surfboards. surfboards O Kenji currently employs a cost-minimizing combination of surfboards and instructors.

Explanation / Answer

Answer.)  Kenji could lower his costs without reducing his output if he employed fewer instructors and used more surfboards.

for equilibrium,

( pay to instructor / rent of surfboard ) = ( MRP of last instructor / MRP of last board )

Since ,

(rent of surfboard)x( MRP of last instructor) < ( pay to instructor)x(MRP of last board)

Therefore, firm should employ more seaboards so that MRP ratio could reach equilibrium in line with pay-rent ratio.

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