The cost of hiring a new lab technician is $8000 per month (including fringes); the cost of leasing additional testing equipment is $10,000 per month. A new lab technician would allow LLI to increase its output from 60,000 to 62,000 tests per month; a new piece of testing equipment is capable of increasing current output by 2500 tests per month.
A. Does LLI's current employment of lab technicians and testing equipment reflect an optimal mix of labor and equipment? Show all your work and describe your answer well.
B. If each test provides a $6 net marginal revenue before labor and capital costs, is expansion advisable? Show all your work and describe your answer well.