Consider the following information in the table for Chloe’s Restaurant and answer the questions below by using the cost minimization rule that takes into account the marginal product per dollar of inputs of production.
Item
Cost
Marginal Product of Capital
$10,000
Marginal Product of Labor
$500
Wage Rate
$15
Rental Price of Pizza Ovens
$600
Is the owner of Chloe’s Restaurant minimizing costs? Explain by computing marginal productivity per dollar using the data in the table.
To increase productivity and lower costs of production, should Chloe rent more ovens and hire fewer workers, or rent fewer ovens and hire more workers? Explain.
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