Medfin Accounting Company (MAC) Assignment


Medfin Accounting Company (MAC) specializes in providing accounting and tax services for medical establishment and professionals. Presently, the company’s production method is highly labor-intensive because many of the book keeping tasks are done manually. MAC employs 50 workers (L) paying them each, on average, $50,000 per year. MAC also has 40 computers (K). The company has leased these computers along with their accompanying software packages at $5,000 per year each. Presently the firm provides accounting and tax services to 150 clients.

a. Write the equation for the company’s isocost.

b. At this given mix of inputs ( K = 40, L= 50) the firm’s marginal rate of technical substitution (MPL/MPK) is -6. Is this mix of capital and labor that MAC is using efficient (optimal)? Explain as specifically as you can.

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