ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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b. The Yorkshire Cricket Company makes cricket bats out of lumber supplied to it by Acme Sporting Goods, which
pays Yorkshire £10 for each finished bat. Yorkshire's only factors of production are lathe operators and a small
building with a lathe. The number of bats per day it produces depends on the number of employee-hours per
day, as shown in the table below.
Number of bats per day
0
5
10
15
20
25
30
35
Number of employee-hours per day
0
1
2
4
7
11
16
22
(i) If the wage is £15 per hour and Yorkshire's daily fixed cost for the lathe and building is £60, what is the
profit-maximising quantity of bats?
(ii) What would be the profit-maximising number of bats if the firm's fixed cost were not £60 per day but only
£30?
(iii) How would Yorkshire's profit-maximising level of output be affected if the government imposed a tax of
£10 per day on the company? (Hint: This tax independent from the production level.)
(iv) What would Yorkshire's profit-maximising level of output be if the government imposed a tax of £2 per
bat? (Hint: This tax is linked to the production level) Why do these two taxes have such different effects?
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Transcribed Image Text:b. The Yorkshire Cricket Company makes cricket bats out of lumber supplied to it by Acme Sporting Goods, which pays Yorkshire £10 for each finished bat. Yorkshire's only factors of production are lathe operators and a small building with a lathe. The number of bats per day it produces depends on the number of employee-hours per day, as shown in the table below. Number of bats per day 0 5 10 15 20 25 30 35 Number of employee-hours per day 0 1 2 4 7 11 16 22 (i) If the wage is £15 per hour and Yorkshire's daily fixed cost for the lathe and building is £60, what is the profit-maximising quantity of bats? (ii) What would be the profit-maximising number of bats if the firm's fixed cost were not £60 per day but only £30? (iii) How would Yorkshire's profit-maximising level of output be affected if the government imposed a tax of £10 per day on the company? (Hint: This tax independent from the production level.) (iv) What would Yorkshire's profit-maximising level of output be if the government imposed a tax of £2 per bat? (Hint: This tax is linked to the production level) Why do these two taxes have such different effects?
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