Cobb-Douglas production function: log Yi log 1 2 log X 2i 3 log X 3i ui where Y= Output‚ X 2 = Labour input‚ X 3 = Capital input‚ u = stochastic disturbance term. Show that 2 and 3 give output elasticities of labour and capital. [Hint: just recall the definition of the elasticity coefficient and remember that a change in the logarithm of a variable is a relative change‚ assuming the changes are rather small] (7 marks) b) To answer this question‚ you have to refer to the production function
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consultant’s recommendation to potentially outsource the manifold production line. Through our analysis you will see that the consultants have not considered the full financial impact that this outsourcing would have on the company. This is likely because the recommendation has not taken into consideration the range of costs affecting Bridgeton industries. Through our analysis it becomes clear that the decision to retain the manifold production line will be more financially beneficial to the company. We
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Art Gonzalez Weekly Assignment 4: Developing Transnational Strategies 1 Compare and contrast international‚ multinational‚ global and transnational strategies which are used by today ’s MNEs. In dealing with the environmental forces‚ global efficiency‚ flexibility and learning‚ to achieve success‚ worldwide operational managerial methods led to four management strategies known as international‚ multinational‚ global‚ and transnational (Bartlett & Beamish‚ 2014‚ p. 215). The following
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profit- maximizing output. With an input price of $0‚ MIC is $0‚ the optimum input is 8 (MVP is still above MIC but using 9 units of input violates the rule) which will produce 183 units of output. This is the maximum output possible given this production function‚ that is‚ TPP is maximum and MPP is the smallest it gets before going negative. Only at an input price of $0 can we be sure the profit maximizing point is where output is maximum. 4. How does the law of diminishing returns cause MC
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| Capacity Strategy of Alden Products‚ Inc. | Submitted by Varsha Advani (11349) | | | | | Capacity strategy should embody a mental model of how a firm works in a given industry and geographic region. There are a series of assumptions and predictions about the log-term behaviour of markets‚ technologies‚ costs and competitor’s behaviour. Such a model would include the following factors: * Predicted growth and variability of demand for the firm’s products and services
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FINANCIAL COSTS‚ AND BENEFITS. 7 REPRESENT YOUR ANALYSIS WITH ‘COST-VOLUME-PROFIT (OR BENEFIT)’ CURVES (ALSO CALLED BREAK-EVEN ANALYSIS) FOR THESE TWO ALTERNATIVE CAPACITIES OPTIONS. FROM THIS DIAGRAM‚ SUGGEST THE OPTIONS FOR DIFFERENT RANGES OF PRODUCTION VOLUME. 9 What are the risks in each option? 11 Draw a decision tree to represent both the situations. You may assume suitable data (if needed) to complete this exercise. Finally suggest which option is the best for the Company? 12 How does the
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synergies in the joint production can no longer be exploited. Moreover‚ the results indicate increasing returns to scale in almost all outputs‚ which combined with cost complementarity‚ can be considered as a suggestive evidence for natural monopoly. Alternatives like introduction of incentive regulation schemes are suggested by the author to increase competition amongst bidders to improve cost structure in each mode of transport. An empirical study of the Cobb–Douglas production function properties
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Besanko & Braeutigam – Microeconomics‚ 3rd edition Solutions Manual Chapter 8 Cost Curves Solutions to Review Questions 1. The long-run total cost curve plots the minimized total cost for each level of output holding input prices fixed. In other words‚ for a given set of input prices‚ the long-run total cost curve represents the total cost associated with the solution to the long-run cost minimization problem for each level of output. When the price of one input increases‚ the isocost line
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opportunities facing the company in their choice of capacity and process technology decisions. For BCF‚ conching technology is a critical element in their primary production process‚ transforming fatty cocoa powders (input) into liquid chocolate with increasingly controllable physical properties that are used in secondary processes for the production of a variety
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ECONOMIES OF SCALE Economies of scale are the cost advantages that a business can achieve by expanding the scale of production. That is‚ when long-run average costs (LRAC) fall. Overhead costs (fixed) are spread over more units produced. Overhead costs (fixed costs) are spread more when more units are produced. These lower costs are an improvement in productive efficiency and can benefit consumers in the form of lower prices. Units produced Total cost Average cost
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