A small rural hospital’s management assesses the following production and input price situation with respect to two types of labor (e.g., RNs with and without bachelor’s degrees) which can be imperfectly substituted for one another: MPL1 = 10; PL1 =5; MPL2 =4; PL2 = 4. The hospital is operating in the second stage of the production function with respect to each type of labor. If the firm wishes to minimize cost for the current output, it should: A. Make no change. B. Increase L2 and decrease L1. C. Increase L1 and decrease L2. D. Increase both inputs. E. Decrease both inputs.

A small rural hospital’s management assesses the following production and input price situation with respect to two types of labor (e.g., RNs with and without bachelor’s degrees) which can be imperfectly substituted for one another: MPL1 = 10; PL1 =5; MPL2 =4; PL2 = 4. The hospital is operating in the second stage of the production function with respect to each type of labor. If the firm wishes to minimize cost for the current output, it should: A. Make no change. B. Increase L2 and decrease L1. C. Increase L1 and decrease L2. D. Increase both inputs. E. Decrease both inputs.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter7: Production Economics

Section: Chapter Questions

Problem 1.5CE

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