Posted: June 15th, 2022

Second Mid-Term (Alternative) Test Part One (Chapter 6) Problem #3

Problem #1A agency has the next short-run manufacturing perform:Q = 50L + 6L^2 – zero.5L^3Where Q = Amount of output per weekL = Labor (variety of employees)^ exponential energy L^2 implies L squareNote: Extra necessary than the algebra is the clear clarification of the implications behind the numbers for all three issues.1. Assume that every employee is paid $10 per hour and works a 40-hour week. What number of employees ought to the agency rent if the worth of the output is $10?2. Throughout financial down flip, companies scale back worth in an effort to keep aggressive. Because of this, the worth of the output falls to $7.50. What do you assume be the quick run affect of this worth discount on the variety of employees employed and why?three. What would companies do in the long term so far as manufacturing and hiring are involved and why if economics state of affairs doesn’t enhance and worth discount doesn’t Help their backside line? Think about what enterprise often does if financial woe persists.four. Henry Ford, the founding father of Ford Motor Firm, provided in 1914 $5 workday wage, which was about twice the going wage. What’s the rationale behind Ford’s high-wage coverage to the marginal productiveness idea of employment mentioned within the textual content guide? What’s the main distinction of their respective targets? Be particular as to what every method tries to attain. Ford known as “the $5-a-day wage” one of many most interesting cost-cutting strikes.In any hiring choice, there are sometimes three totally different issues; “antagonistic selection” as a result of “asymmetry of information” previous to hiring and of “ethical hazard” after hiring in your reply. Please combine these three phrases, asymmetry of knowledge, antagonistic choice, and ethical hazard into your reply and clarify clearly how Ford’s excessive wage coverage particularly solved these three issues related to hiring?Problem #2The proprietor of a small car-rental service is making an attempt to determine on the suitable numbers of automobiles and mechanics to make use of within the enterprise for the present stage of operations. He acknowledges that his selection represents a trade-off between the 2 sources. His previous expertise signifies that this trade-off is as follows:Autos Mechanics100 2.5 (embody one part-timer)70 550 1040 1535 2532 351. Assume that annual (leasing) price per automobile is $6,000 and the annual wage per mechanic is $25,000. What mixture of automobiles and mechanics ought to he make use of?2. Illustrate the issue with using an iso-quant/iso-cost diagram with variety of automobile leased on horizontal axis and variety of mechanics employed on vertical axes. Draw two iso-cost curves: one utilizing annual the leasing price per automobile ($6,000) and the annual wage per mechanics ($25,000) given in the issue. On this case leasing automobile price is comparatively cheap to the annual wage per mechanics, Now, one other iso-cost curve, hypothetical (no knowledge given) this time, by which annual mechanics price is comparatively cheap to automobile leasing price. Point out graphically the (two) optimum combos of mechanics employed and automobiles with one iso-quant curve representing a given (goal) stage of auto leasing enterprise with two iso-cost curves; one primarily based on given values of the annual price of hiring mechanics and leasing automobiles in the issue and one other iso-cost curve, hypothetical one, by which mechanics price is comparatively cheap, i.e., two reverse instances of iso-cost curves, and focus on implication behind two totally different optimum combos of sources. To be constant automobiles leased on horizontal and mechanics on vertical axes.Problem #3An American firm that sells client electronics merchandise has manufacturing amenities in Mexico, Taiwan, and Canada. The typical hourly wage, output, and annual overhead price for every web site are as follows:Mexico Taiwan CanadaHourly wage fee $1.50 $three.00 $6.00Output per particular person 10 18 20Mounted overhead price $150,000 $90,000 $110,0001. Given these figures, is the agency at present allocating its manufacturing sources optimally? If not, why do you assume so? Think about output per particular person as a proxy for marginal product.2. Suppose the agency desires to consolidate all of its manufacturing into one facility. The place ought to it find? Is there any distinction in treating price data between (1) and (2)?three. In deciding to consolidate its manufacturing into one facility, what are different components the agency wants to think about? Please checklist and clarify your causes.four. Nike outsources its manufacturing operation whereas New Stability doesn’t.When it comes to marginal productiveness (output per particular person) and hourly wage fee, clarify why New Stability didn’t outsource its manufacturing whereas Nike did briefly.

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