Question

Mr. Kamal is an owner of the communication center at Y junction and  uses four word processors and two typewriters to produce reports. The marginal product of a typewriter is 500 pages per day, and the marginal product of a word processor is 5000 pages per day. The rental price of a typewriter is Rs.1 per day, whereas the rental price of a word processor is Rs.50 per day. Is Mr. Kamal utilizing type writers and word processors in a cost-minimizing manner? Which service process is more profitable? Type writer or word processing? Justify your answer

Answer 1

Mr Kamal doesn't minimize his costs, because marginal products per dollar are not equal for typewriters anf for word processors. 500/1=500, 5000/50=100, 500>100. Typewriter is more profitable, because it's marginal product per dollar of rent is higher.