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332 selected chapter 7 solutions

# 332 selected chapter 7 solutions - ST7.1 SOLUTION A The...

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ST7.1 SOLUTION A. The rule for an optimal combination of Testlogic-1 (T) and Accutest-3 (A) equipment is This rule means that an identical amount of additional output would be produced with an additional dollar expenditure on each input. Alternatively, an equal marginal cost of output is incurred irrespective of which input is used to expand output. Of course, marginal products and equipment prices must both reflect the same relevant time frame, either hours or months. B. On a per hour basis, the relevant question is 27 \$18,000/(25 x 8) = ? 48 \$32,000/(25 x 8) 0.3 = _ 0.3 On a per month basis, the relevant question is 27 x (25 x 8) \$18,000 = ? 48 x (25 x 8) \$32,000 0.3 = _ 0.3 In both instances, the last dollar spent on each machine increased output by the same 0.3 units, indicating an optimal mix of testing machines. C. The rule for optimal input employment is T A T A MP MP = P P

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MRP = MP Η MR Q = Input Price This means that the level of input employment is optimal when the marginal sales revenue derived from added input usage is equal to input price, or the marginal cost of employment.
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