Fred's Foundry is a price taker in both product and factor markets. The wage of unskilled workers is $10 per hour and skilled workers can be hired for $25 per hour. Assume that Fred hires 6 unskilled workers and 12 skilled workers and that the last unskilled worker hired raises output by 5 castings while the last skilled worker hired raises output by 10 castings.Is Fred technically efficient?
If Fred is not technically efficient, what changes in the number of skilled and unskilled workers should he make? Why?
If the price of castings is $2 each, is Fred allocatively efficient? Please answer yes or no and give your reason below.