8‑2 (Key Question) Gomez runs a small pottery firm. He hires one helper at $12‚000 per year‚ pays annual rent of $5‚000 for his shop‚ and spends $20‚000 per year on materials. He has $40‚000 of his own funds invested in equipment (pottery wheels‚ kilns‚ and so forth) that could earn him $4‚000 per year if alternatively invested. He has been offered $15‚000 per year to work as a potter for a competitor. He estimates his entrepreneurial talents are worth $3‚000 per year. Total annual revenue
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Business Strategy‚ Pearson Education Limited‚ London 2004. 5.McShane S.L‚ Von Glinow M.A Organizational behavior [essentials]‚ McGraw-Hill‚ New York 2007. 6.Porter‚ M.E. Competitive Advantage‚ Free Press‚ New York‚ 1985. Graphs: 1.Fig.1 - Diseconomies of scale‚ source: http://www.nationmaster.com/encyclopedia/Image:Diseconomies-of-scale.PNG‚ accessed on 15/04/2009. 2.Fig.2 - Porter’s generic value chain‚ source: http://www.themanager.org/models/valuechain.htm‚ accessed on 15/04/2009.
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Innovation 4. Customer Responsiveness Economies of Scale are unit cost reductions associated with a large scale of output. Fixed Costs are costs that must be incurred to produce a product whatever the level of output; examples are the cots of purchasing machinery‚ setting up machinery for individual production runs‚ building facilities‚ advertising‚ and R&D. Diseconomies of Scale are the unit costs that increases associated with a large scale of output. Learning Effects are cost savings that
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capacity (production volume) for which the average unit cost of output is at a minimum. • Economy of scale – The output range in which average unit cost decreases as unit production volumes increase. • Diseconomy of scale – The output range in which average unit cost rises due to added costs incurred at the operating level exceeding the best operating level. Economies & Diseconomies of Scale Managing Demand Demand Short term: curtail demand by raising prices‚ scheduling longer lead time
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the firms’ main objective is to increase sales by producing and distributing more of the firms existing products‚ the advantage is that the company can exploit economies of scale‚ reducing overheads and expenses. But each company will have a limit to its economies of scale before it starts to experience diseconomies of scale. The company will become too large and this will make it ridged and inflexible to changes in customer demands and market conditions. If the company expands through merger
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pre month‚ it long-run total cost $9.5 million per month. Does Boeing exhibit economies or diseconomies of scale? * The long-run average total cost of producing 9 planes is $9 million /9 = $1 million. The long-run average total cost of producing10 planes is $9.5 million / 10 =$0.95 million. Since the long-run average total cost declines as the number of planes increases‚ Boeing exhibits economies of scale. Quick Quiz: How does a competitive firm determine its profit-maximizing level of output
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econonmMicroeconomics Review Quiz Test 2 1. When is marginal utility equal to zero? A. When TU is zero. B. When MU is at its maximum. C. When TU is at its maximum. D. When MU is at its minimum. The following table shows Mia ’s $ marginal utility for litres of soya milk: 2. Refer to the above table to answer this question. Suppose that Mia has a budget of $7 and the price of a litre of soya milk is $1‚ what is the maximum quantity that Mia might purchase? A. 0. B. 4 litres
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J370 Fall 2013 Practice Questions for Exam #1 IMPORTANT NOTES: 1-These questions are only intended to illustrate the kind/type of questions that will be on your examination. They are not intended to tell you the topics covered‚ but only to give you practice with the kinds of questions you will encounter. To prepare for the examination you need to be familiar with the topics covered in lecture and those discussed in the textbook. 2-There are 50 multiple choice questions on Exam 1. Forty-five
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be termed as negligible. Wal-Mart SWOT Analysis. Strengths - Wal-Mart is a powerful retail brand and perceived by customers to offer lowest prices and thereby value for money. Weaknesses – Due to the huge scale of operation it is possible that Wal-Mart may experience diseconomies of scale. Opportunities – To establish dominance in European markets and Asian markets like Japan and China. Threats – Since Wal-Mart is the largest company in the world it is subject to political pressures as well
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Master of Business Administration- MBA Semester 1 MB0042 – Managerial Economics - 4 Credits (Book ID: B 1625 ) Assignment Set -1 (60 marks) Note: Assignment Set -1 must be written within 6-8 pages. Answer all questions. Q1. Discuss profit maximising model in detail. 10 marks(350-400 words) Answer : Profit maximization is the rational behaviour of equilibrium assumption. Any firm which aiming at profit maximization model; will go increasing its output till it reaches maximum profit output
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