A publishing house is using 400 printers and 200 printing presses to produce boo

Question

A publishing house is using 400 printers and 200 printing presses to produce books. The printers' wage rate is $20 and the price of a printing press is $100. The last printer added 20 books to total output, while the last printing press added 50 books to total output. The publishing house Question 32 options: 1) is using the cost-minimizing combination of printers and printing presses. 2) should use more printers because they are cheaper than printing presses. 3) should use more printing presses because they are more productive than printers. 4) could produce the same number of books at a lower cost by using more printing presses and fewer printers. 5) could produce the same number of books at a lower cost by using more printers and fewer printing presses.

Explanation / Answer

(Marginal productivity of printer)/(Wage rate of the printer)

= (Marginal productivity of printing press)/(Price of the printing press)

That is,

20/20 50/100

       1 0.5

So, the publishing house is not making the optimal input choice. The manager can adjust the input usage by reducing the number of printing press. By reducing the number of printing press, the marginal productivity of the printing press will increase and thereby the ratio can be equated.

they can increase the number of printers also in order to get the optimal solution.

Thus the largo publishing house should uses less than 200 printing presses or can use more than 400 printers.

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