Question: Mitsubishi announced plan to reverse 6% declining sales. Sales fell in North America by 29% due to combination of large number of bad loans and reduced demand resulting from tightening of lax credit criteria. In Japan sales have flipped 56% (excluding Minivans) due to automobile recalls and attempts to cover up faulty products. As part of restructuring, Mitsubishis marginal rate of technical substitution is 0.15 (in absolute value). To hire workers Mitsubishi must pay competitive hour’s rate of 1.330 yen. In study of production process and markets where capital are procured suppose that Mitsubishi determines that marginal productivity of capital is 0.5 small cars per hour at its new targeted level of output. Same study indicates that the average selling price of Mitsubishi smallest car is 950,000 yen. Determine the rate at which Mitsubishi can rent capital and the marginal productivity of labor at is new targeted level of output. To minimize cost Mitsubishi should hire capital and labor until the marginal rate of technical substitution reaches what portion?
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