Reference no: EM133030921

1(a) Recently, an USA-based Airline Group recorded orders for more than 15,000 jetliners and delivered more than 13,000 airplanes. To maintain its output volume, this company combines efforts of capital and more than 90,000 workers. Suppose an European Company enjoys a similar production technology and produces a similar number of aircraft, but that labour costs are higher in Europe than in the U.S. Would you expect workers of these two companies to have the same marginal product? Explain. (b) Try to explain why the businesses of hair salons and accounting firms do not favour large scale production.

2The A-1 Corporation supplies airplane manufacturers with performed sheet metal panels that are used on the exterior of aircraft. Manufacturing these panels requires only five sheet metal-forming machines, which cost $500 each, and workers. These workers can be hired on an as-needed basis in the labour market at $9,000 each. Given the simplicity of the manufacturing process, the preformed sheet metal panel market is highly competitive. Therefore, the market price for one of A-1's panels is $80. Based on the production data in the accompanying table, how many workers should A-1 hire to maximize its profits?

Sheet Metal-Forming Machines    Workers      No. of Panels Produced 
5 0 0 
5 1 600 
5 2 1,000 
5 3 1,290 
5 4 1,480 
5 5 1,600 
5 6 1,680

(b) Your friend considers terminating a new employee because this new employee did not add as much to the firm's overall output as did a worker hired two weeks earlier. Based on this evidence, do you agree that the latest worker hired should be fired? Explain

3Sheila operates a photocopying shop in Yau Ma Tei. In January 2021, her total sales were $150,000. She prepared a simple Income and Expense account for the month as follow: 
Revenue $150,000 
Expense 
Cost of paper and printing powder $60,000 
Salary $12,000 
Depreciation $20,000 
Profit $58,000

Sheila explained that the paper and printing powder used in January was purchased in December 2020 for an amount of $60,000. She paid a monthly salary to her shop assistant Paul $12,000 per month, while Sheila herself received nothing. She promised Paul that by the end of 2021, he will be paid a guaranteed bonus equal to 10% of his total salary received in 2021. Sheila bought the photocopying machines ($300,000) and renovated the shop ($180,000). She expected the machines as well as the decoration to last 24 months. By using the 'straight line method', she evenly spread this cost over 24 months to arrive at the depreciation cost for January. Based on your understanding of economics, comment on Sheila's treatment of the cost of operating the business in January 2021.