Economic Strategy for Business

4.
a.
(i) Labour intensive industry refers to industry that requires substantial amount of human labour to produce industrial products. For example, in Australia coal mining is one of the labour intensive industries. According to Australian Coal Association (Coal & the Community), black coal mining is one of Australia’s most important industries that creates employment, low-cost fuel and important source of export revenue.
(ii) Coal mining industry is labour intensive because this particular industry requires a large number of human labours to run heavy machinery and work in large factories to produce the goods.
(iii) Economies of scale is where the long-run average cost declines as production increases in simple explanation …show more content…

(i) The productivity of the glass installers will be increase in a change from salary to piece rates, on the new system they will get paid based on the fixed amount per window completed. So the more glasses they fixed, the more they will get paid. (ii) Increase in productivity leads to increase in the total output, in this case number of glasses repaired or fixed. (iii) The average cost will stay the same which is the old hourly wage system just like in ‘Previous System’ (iv) The turnover of productive workers will be high because of the setting of piece rate in the ‘New System’ (v) If the workers increase their output more because of the piece rate it will increase the profit for the principal.

3.
(a) The marginal cost is (100-60)/(40-20) = 2

(b) The average cost at Qy = 20 is 60/20 = 3 The average cost at Qy = 40 is 100/40 = 2.5

(c) Yes. The average cost (AC) decrease from 3 to 2.5 when output increase from 20 to 40.

(d) The marginal cost is (180-75)/(45-15) = 3.5

(e) The average cost at Qx = 15 is 75/15 = 5 The average cost at Qx = 45 is 180/45 = 4

(f) Yes. The average cost (AC) decrease from 5 to 4 when output increase from 15 to 45.

(g) Since TC(15, 20) = 130 < TC(15, 0) = 75 + TC(0, 20) = 60 and TC(45, 40) = 260 < TC(45, 0) = 180 + TC(0, 40) = 100. Hence we have economies of scope.

(f) The fixed cost T(0, 0) = 60 – 20 = 40

1.
(a) AFC =