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lowest-cost combination of workers

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Lobo Lighting Corporation currently employs 100 unskilled laborers, 80 factory technicians, 30 skilled machinists, and 40 skilled electricians. Lobo feels that the marginal product of the last unskilled laborer is 400 lights per week, the marginal product of the last factory technician is 450 lights per week, the marginal product of the last skilled machinist is 550 lights per week, and the marginal product of the last skilled electrician is 600 lights per week. Unskilled laborers earn $400 per week, factory technicians earn $500 per week, machinists earn $700 per week, and electricians earn $750 per week.

Is Lobo using the lowest-cost combination of workers to produce its targeted output? If not, what recommendations can you make to assist the company?

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Solution Preview

A diagram is not necessary to answer this question. You need the MP/P for each group of workers to be the same for a lowest cost combination.

unskilled = 400/$400 = 1

factory technicians = 450/$500 = ...

Solution Summary

The lowest-cost combination of workers is assessed.