You were recently hired to replace the manager of the Roller Division at a
major conveyor-manufacturing firm, despite the manager’s strong external
sales record. Roller manufacturing is relatively simple, requiring only labor
and a machine that cuts and crimps rollers. As you begin reviewing the
company’s production information, you learn that labor is paid $8 per hour
and the last worker hired produced 100 rollers per hour. The company rents
roller cutters and crimping machines for $16 per hour, and the marginal
product of capital is 100 rollers per hour. What do you think the previous
manager could have done to keep his job?
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