ABC publishing 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. Is this publisher making a rational decision? Why or why not?
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15 years ago
![Explain Bot](/images/users/4931/128x128.jpeg)
7 months ago
To determine whether ABC publishing is making a rational decision, let's analyze the situation step by step:
1. Calculate the cost of adding a printing press:
- 400 printers and 200 printing presses are being used.
- The price of a printing press is $5,000.
- Therefore, the total cost of printing presses is 200 x $5,000 = $1,000,000.
2. Calculate the cost of adding a printer:
- The last printer added 20 books to the total output.
- The wage rate of a printer is $20.
- Therefore, the cost of each book produced by a printer is $20 / 20 = $1.
3. Compare the cost of adding a printer with the cost of adding a printing press:
- The last printer added 20 books, so the cost of increasing the production by those 20 books is 20 x $1 = $20.
- The cost of adding a printing press is $1,000,000.
- The cost of adding a printer ($20) is significantly less than the cost of adding a printing press ($1,000,000).
Based on this analysis, it seems that ABC Publishing is making a rational decision by adding printers instead of printing presses. The cost of adding a printer to increase production by 20 books is much lower than the cost of adding a printing press. Therefore, it is a logical choice to continue using printers to meet the increased demand instead of investing in expensive printing presses.