Managerial Economics HW #4 (Chapter 5) 1.A firm can manufacture a product according to the production function Q F(K‚ L) K3/4L1/4 a. Calculate the average product of labor‚ APL‚ when the level of capital is fixed at 16 units and the firm uses 16 units of labor. How does the average product of labor change when the firm uses 81 units of labor? Saat (Capital) K = 16 (Labour) L = 16 Q = (16)0‚75(16)0‚25 Q = (8)(2) = 16 APL =Q/L =16/16=1. Saat K= 16 Q= 81 Q = (16)0‚75(81)0‚25 Q = (8)(3)
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Production Cost Analysis and Estimation Applied Problems It is important to understand the economics involved in production costs. This includes understanding marginal product and marginal costs. The following problems analyze these factors for a pizza shop and a shoe company. A table and calculations are provided for better visual understanding. Problem 1: William’s Pizza Shop William owns a small pizza shop. He is attempting to lower production cost by increasing the number of pizzas produced
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Figure 10-2 8) Which of the following costs will not change as output changes? A) marginal cost B) total variable cost C) average variable cost D) average fixed cost E) total fixed cost 9) Average fixed costs of production A) remain constant. B) will rise at a fixed rate as more is produced. C) graph as a U-shaped curve. D) fall as long as output is increased. 10) If fixed costs do not change‚ then marginal cost A) also remains constant. B) equals the change
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1. Minimum point of the average variable cost is a. at the same level of output as the minimum average total cost b. at a smaller level of output than the minimum average total cost c. at a larger level of output than the minimum average total cost d. at the same level of output as the average fixed costs e. same as minimum marginal cost 2. The multiplant monopolist maximises profits when a. Marginal cost equals marginal revenue b. When marginal cost in each plant are equal c. When
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Economic Order Quantity EOQ‚ or Economic Order Quantity‚ is defined as the optimal quantity of orders that minimizes total variable costs required to order and hold inventory. Every company worries about two things when deciding how to manage their inventory. How much should we order? And how often should we order? These represent variables that come with their own changing costs. The Economic Order Quantity‚ or EOQ‚ is that magic number that represents the optimal quantity of orders that
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competitive market‚ price is always equal to marginal revenue. TRUE A monopolistically competitive market is characterized by barriers to entry. FALSE Cartels normally engage in direct price competition. FALSE Multiple Choice: Choose the best economic answer. Questions 1 to 4 refer to the following costs table: Q TFC TVC TC AFC AVC AC MC 0 1 2 3 4 5 -10 (k) 9.7 10.5 12 -20 14 13 13 (l) -10 8 (m) 13 18 (f) (f) (f) (f) (f) (f) 0 ? 18 ? 42
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Economic Theory of Production Economic theory of the firm begins with theory of production. What is a firm? The essence of a firm is to buy inputs‚ convert them to outputs‚ and sell these outputs to consumers‚ firms or government. Therefore a firm is poised between two markets. It is a demander in factor markets. It buys the inputs required for production in factor markets (markets that supply inputs for firms). It is a supplier in market for goods and services. It has to adjust its production
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Managerial Economics – Trial Exam – Theoretical Questions Part I: Indicate whether each of the following statements is True (T) or False (F). Comment. (5 Questions‚ Choose 4) A The law of diminishing returns takes effect‚ when a firm’s both marginal product and average product decline after the latter reaching its maximum. False: The law of diminishing returns takes effect when MP reaches its maximum value and starts to diminish “decline”; then‚ MP equals AP when the latter reaches its
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is in the same industry and in the same stage of production as the merged firm‚ e.g.BA and Iberia. In this case both the companies are in the same stage of production and also in the same industry (i.e. airlines industry). The goal of horizontal integration is to consolidate like companies and monopolize an industry. Besides‚ they can also gain Economic of Scale when doing such strategies. Put another way‚ they can reduce average cost of production in the long run. For example‚ according to extract
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Diff between economics vs managerial economics 1 The traditional Economics has both micro and macro aspects whereas Managerial Economics is essentially micro in character. 2. Economics is both positive and normative science but the Managerial Economics is essentially normative in nature. 3. Economics deals mainly with the theoretical aspect only whereas Managerial Economics deals with the practical aspect. 4. Managerial Economics studies the activities of an individual firm or unit. Its analysis
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