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Largo Publishing House uses 400 printers and 200 printing presses to produce books. A printer's wage rate is $20 and the price of a printing press is $5,000. The last printer added 20 books to total output, while the last press added 1000 books to total output.
Is the publishing house making the optimal input choice? Why...
If not, how should the manager of Largo Publishing House adjust input usage?

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Largo Publishing House uses 400 printers and 200 printing presses to produce books. A printer's wage rate is $20 and the price of a printing press is $5,000. The last printer added 20 books to total output, while the last press added 1000 books to total output.
Is the publishing house making the optimal input choice? Why...
If not, how should the manager of Largo Publishing House adjust input usage?

Solution Preview

The Marginal Product of Labour divided by the cost of labour is 1. That is, you spend $20, you get 20 books.

The Marginal Product of the Printing Press divided by the cost of capital ...

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