None 6. Critical analysis Q8A dressmaker uses labor and capital (sewing machines) to produce dresses in a competitive market. Suppose the last unit of labor hired cost $1,000per month and increased output by 500 dresses. The last unit of capital hired (rented) cost $500 per month and increased output by 400 dresses.The marginal product per dollar spent on the last unit of labor is 0.60.6, and the marginal product per dollar spent on the last unit of capital isThe dressmakercurrently minimizing unit costs.In order to minimize unit costs, what strategy should the dressmaker undertake?The dressmaker should increase units of capital and decrease units of labor utilized in production.The dressmaker should increase units of labor and decrease units of capital utilized in production.The dressmaker is already minimizing unit costs, so no changes are needed.Grade It NowSave & ContinueContinue without saving

The correct answer is: The dressmaker should increase units of capital and decrease units of labor…

Answered: 6. Critical analysis Q8 A dressmaker…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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11. Consider the following table illustrating the production function of gadgets. Furthermore, suppose the firm has fixed costs of $2,000/day and the wage rate is $250/day. What is the firm's total cost of producing 2,600 gadgets? a $2,000 b $2,500 c $3,500 d none of the above
7. You are economic consultant for Jack, who farms raw cotton in a perfectly competitive market. One day he gives you the following data at his present level of production: Output = 2000 pounds, market price = $5.00, total cost =$8000, fixed cost=$2000, marginal cost=$5. The minimum of AVC occurs at {1000 pounds at $2} and the minimum of ATC at {1500 pounds at $3.5}. Please help Jack with the following questions based on the above figures: a. Draw a graph for the raw cotton market and a graph for Jack’s farm current situation that includes MC, ATC, and AVC, labeling all relevant points on axes with numerical values. Is Jack maximizing the profit (minimizing the loss)? Why or why not? Label the total profit/loss area. b. Suppose more farmers enter the raw cotton market until the market price is $3.00 per pound. On the same graphs, show the effect of this change in the market place. Would you like to suggest Jack leaving the market in the short run? Explain your answer
9. The law of diminishing marginal products indicates that: as extra units of a variable resource are added to a fixed resource, A) marginal product will decline beyond some point. because of economies and diseconomies of scale a competitive B) firm's long-run average total cost curve will be U-shaped. the demand for goods produced by purely competitive industries is C) downsloping. D) beyond some point the extra utility derived from additional units of a product will yield the consumer smaller and smaller extra amounts of satisfaction.
2. A manager hires labour and rents capital equipment in a very competitive market. Currently, the wage rate is £6 per hour and capital is rented at £12 per hour. If the marginal product of labour is 50 units of output per hour and the marginal product of capital is 75 units of output per hour, is the firm using the cost-minimising combination of capital and labour? If not, should the firm increase or decrease the amount of capital used in the production process?
5. Costs in the short run versus in the long run Ike's Bikes is a major manufacturer of bicycles. Currently, the company produces bikes using only one factory. However, it is considering expanding production to two or even three factories. The following table shows the company's short-run average total cost (SRATC) each month for various levels of production if it uses one, two, or three factories. (Note: Qequals the total quantity of bikes produced by all factories.) Number of Factories Q = 50 1 180 2 270 3 360 AVERAGE TOTAL COST (Dollars per bike) 400 360 320 280 240 Suppose Ike's Bikes is currently producing 50 bikes per month in its only factory. Its short-run average total cost is 200 per bike. Suppose Ike's Bikes is expecting to produce 50 bikes per month for several years. In this case, in the long run, it would choose to produce bikes using 160 On the following graph, plot the three SRATC curves for Ike's Bikes from the previous table. Specifically, use the green points…
7. You are economic consultant for Jack, who farms raw cotton in a perfectly competitive market. One day he gives you the following data at his present level of production: Output = 2000 pounds, market price = $5.00, total cost =$8000, fixed cost=$2000, marginal cost=$5. The minimum of AVC occurs at {1000 pounds at $2} and the minimum of ATC at {1500 pounds at $3.5}. Please help Jack with the following questions based on the above figures: a. Draw a graph for the raw cotton market and a graph for Jack’s farm current situation that includes MC, ATC, and AVC, labeling all relevant points on axes with numerical values. Is Jack maximizing the profit (minimizing the loss)? Why or why not? Label the total profit/loss area. b. Suppose more farmers enter the raw cotton market until the market price is $3.00 per pound. On the same graphs, show the effect of this change in the market place. Would you like to suggest Jack leaving the market in the short run? Explain your answe
11. Suppose a firms' average variable cost curve has the typical U-shaped form, if so, then the following is true: A) The average variable cost curve reaches a minimum point where it intersects the marginal cost curve. B) The firms' average product of labour curve must have an inverted U-shape. C) The firms' average product of labour curve reaches a maximum where the output of that labour is equal to the output where the average variable cost curve is minimized.< D) If the marginal cost falls below the average variable cost curve, then the average variable cost curve is downward sloping. E) All of the above F) A & B G) A & C H) A & D I) A, B& Da J) None of the above.
5-8 For the pizza seller whose marginal, average variable, and average total cost curves are shown in the graph below, what is the profit- maximizing level of output and how much profit will this producer earn if the price of pizza is $2.50 per slice? Instructions: In the graph below, label all three curves by clicking on the dropdown to select the appropriate label. Then, indicate the profit-maximizing level of output on the graph. Cost Curves Tools 3.50 3.25 Select Zelect Select 3.00 2.75 nces 2.50 2.25 2.00 1.75 81.50 E 1.25 1.00 0.75 0.50 025 100 200 300 400 500 600 700 800 900 Quantity (alices/day) At the profit maximizing level of output, the producer's profit is: S per day
9. Advantages of outsourcing Indicate whether each scenario in the following table is an example of outsourcing. Not Scenario Outsourcing Outsourcing A French engineering firm closes its own accounts payable department and hires a Swiss accounting firm to take care of this aspect of its business. The Skype office in the United States contracts an independently operated call center in India to handle telephone customer service. Apple decides to internally manufacture displays for iPhone products rather than working with Japanese and South Korean companies. Which of the following are advantages of outsourcing? Check all that apply. Creates opportunity for new exports Reduces costs for the company that is outsourcing O Reduces vulnerability of firms' strategic information
4. Bella and Vela's Flower Shop is a store specializing in floral arrangements for weddings, graduations, and other events. Jane and Vela’s Flower Shop has a fixed cost associated with space and equipment of $150 per day. Each worker is paid $50 per day. The daily production function for Bella and Vela's |Flower Shop is shown in the accompanying table. Each floral arrangement sells for $30 |Quantity of Labor (Workers) |Quantity of Floral Arrangments 1 5 2 3 12 4 14 5 15 14 a. What is the marginal product of labor, MPL, of the first, second, third, fourth, fifth and sixth workers? (Show on a chart). b. What is the marginal revenue product, MRP, of each of the workers? (Show on a chart) How many workers should Bella and Vela hire and why? c.
8. Questions and Problems 16 People often argue that large firms in an industry have cost advantages over small firms in the same industry. For example, they might assert that a big oil company must have a cost advantage over a small oil company. For this to be true, what condition must exist? O There are no economies of scale. There is no necessary condition for large firms to have a cost advantage over small firms. There are economies of scale, and the small firm is operating at an output level at which economies of scale exist. O There are economies of scale, and the large firm is operating at an output level at which economies of scale exist.
7. You are the manager of a firm that uses only labor and capital to produce your product. Assume you hire labor and you rent capital equipment in a very competitive market. You pay your employees at a wage rate of $20 per hour and you rent capital at $25 per hour. Assume the marginal product of labor is 50 units of output per hour and the marginal product of capital is 80 units of output per hour. Based on these given information, clearly explain if you should increase, decrease, or leave unchanged the amount of capital used in your production process.

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