Q. Sunshine Pest Control, Inc., provides exterminator services to residences in Miami area. primary resources SPC employs are skilled exterminators and large dome/air pumps used to cover homes, pump in insecticide and minimize leakage to environment. Currently, SPC employs 10 exterminators at a cost of $15 per hour, employs 2,000 hours of pump time each week at a cost of $3 per hour. Each exterminator works a 40-hour week. This level of employment allows SPC to complete 100 treatments per week for which industry receives $100 each.
A. Assuming that both returns to factors and returns to scale are constant, illustrate what are marginal products for (1) exterminators and (2) gallons of chemicals?
B. Is SPC employing labour and domes in an optimal ratio, assuming that substitution of resources is possible? Elucidate.
C. Conclude marginal income products for exterminators and for domes/pumps employed by SPC. (Assume constant returns to factors in part A.)
D. Is SPC employing an optimal (profit-maximizing) quantity of labour and calculate time? Elucidate.