What artist wage would make yolanda indifferent

Reference no: EM13238362

Yolanda owns an art factory in Palermo, Italy. She is thinking of expanding her exports of large-size paintings of Italian cityscapes. She has had little difficulty recruiting new artists to Palermo to work a 40-hour week in the factory. The weekly wage is $480 and she thinks she can hire as many artists as she needs for that rate. An additional artist normally adds 96 paintings per week to the output of the factory. However, Yolanda has been approached by a Hong Kong dealer who is selling remarkable computerized robots that can closely duplicate the work of her current artists. A robot can paint 210 pictures per week and has a daily operating cost of $168 per operating day. Regardless of whether she uses the robots or additional artists, Yolanda plans to operate the factory only five days per week.

(a) Employ the cost minimizing input rule to determine whether Yolanda should consider buying the robots. (Hint: You will need to convert all values into per week values)

(b) Given the current daily cost of robots, what artist wage would make Yolanda indifferent between employing the robots and hiring more artists?

Reference no: EM13238362

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