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Hernandez Corp. uses two variable inputs, X and Y, to produce
its final product, canoes. Its engineering department has estimated
the marginal product functions for inputs X and Y as follows:
MPx = Y/X
MPy = 4 X/Y
Where X and Y denote, respectively, the quantity in hours of inputs
X and Y used.
At present Hernandez Corp. pays $40 per hour for input X and $10
per hour for input Y. It is using 200 hours of X and 100 hours of Y
per day.
a. Write a paragraph explaining how the Hernandez Corp. finds
the least cost combination of inputs for producing a given rate of
output.
b. Using the data provided above, determine if the Hernandez
Corp. is using a cost minimizing combination of inputs. Explain
your answer/show your work. If your answer is no, how should the
input combination be adjusted?
"border: 0px; height: 0px; margin: 0px; padding: 0px; width: 707px">
Hernandez Corp. uses two variable inputs, X and Y, to produce
its final product, canoes. Its engineering department has estimated
the marginal product functions for inputs X and Y as follows:
MPx = Y/X
MPy = 4 X/Y
Where X and Y denote, respectively, the quantity in hours of inputs
X and Y used.
At present Hernandez Corp. pays $40 per hour for input X and $10
per hour for input Y. It is using 200 hours of X and 100 hours of Y
per day.
a. Write a paragraph explaining how the Hernandez Corp. finds
the least cost combination of inputs for producing a given rate of
output.
b. Using the data provided above, determine if the Hernandez
Corp. is using a cost minimizing combination of inputs. Explain
your answer/show your work. If your answer is no, how should the
input combination be adjusted?
