Explain how these data provide evidence of inefficiency

Assignment Help Business Economics

Reference no: EM131204553

Q1:

At a management luncheon, two managers were overheard arguing about the following statement: "A manager should never hire another worker if the new person causes diminishing returns." Is this statement correct? If so, why? If not, explain why not.

Q2:

Suppose that a firm is currently employing 10 workers, the only variable input, at a wage rate of $100. The average physical product of labor is 25, the last worker added 10 units to total output, and total fixed cost is $5,000

a. What is marginal cost?
b. What is average variable cost?
c. How much output is being produced?
d. What is the average total cost?
e. At the current output rate, is average variable cost increasing, constant, or decreasing?

Q3:

The Largo Publishing House uses 400 printers and 200 printing presses to produce books. A printer's wage rate is
$20, and the price of a printing press is $5,000. The last printer added 8 books to total output, while the last press added 2,500 books to total output. Is the publishing house making the optimal input choice? Why or why not? If not, how should the manager of Largo Publishing House adjust input usage?

Q4:

Gamma Corporation, one of the firms that retains you as a financial analyst, is considering buying out Beta Corporation, a small manufacturing firm that is now barely operating at a profit. You recommend the buyout because you believe that new management could substantially reduce production costs, and thereby increase profit to a quite attractive level. You collect the following product information in order to convince the CEO at Gamma Corporation that Beta is indeed operating inefficiently:

MP_L = 25 P_L =$20

MP_K = 15 P_K =$15

Explain how these data provide evidence of inefficiency. How could the new manager of Beta Corporation improve efficiency?

Q5:

Ross Perot added his memorable "insight" to the debate over the North American Free Trade Agreement (NAFTA) when he warned that passage of NAFTA would create a "giant sucking sound" as U. S. employers shipped jobs to Mexico, where wages are lower than wages in the United States. As it turned out, many U. S. firms chose not to produce in Mexico despite the much lower wages there. Explain why it may not be economically efficient to move production to foreign countries, even ones with substantially lower wages.

Q6:

You are planning to estimate a short- run production function for your firm, and you have collected the following data on labor usage (L) and output (Q):

Labor usage	Output
3	1
7	2
9	3
11	5
17	8
17	10
20	15
24	18
26	22
28	21
30	23

a. Please key in the data into MS Excel for regression analysis. Estimate your firm's short-run production function. Do the parameter estimates have the appropriate algebraic signs? Are they statistically significant at the 5 percent level?

b. At what point do you estimate marginal product (MP) begins to fall?

c. Calculate estimates of average products (AP) and marginal products (MP) when the firm employs 20 workers.

d. When the firm employs 20 workers, is short-run marginal cost (MC) rising or falling? How can you tell?

Q7:

The chief economist for Argus Corporation, a large appliance manufacturer, estimated the firm's short- run cost function for vacuum cleaners using an average variable cost function of the form

AVC = a + bQ + cQ²

where AVC dollars per vacuum cleaner and Q number of vacuum cleaners produced each month. Total fixed cost each month is $180,000. The following results were obtained:

DEPENDENT VARIABLE: AVC		R-SQUARE	F-RATIO	P-VALUE ON F
OBSERVATIONS: 19		0.7360	39.428	0.0001
VARIABLE	PARAMETER ESTIMATE	STANDARD ERROR	T-RATIO	P-VALUE
INTERCEPT	191.93	54.65	3.512	0.0029
Q	-0.0305	0.00789	23.866	0.0014
Q²	0.0000024	0.00000098	2.449	0.0262

a. Are the parameter estimates statistically significant at the 2 percent level of significance?

b. Do the results indicate that the average variable cost curve is U-shaped? How do you know?

c. If Argus Corporation produces 8,000 vacuum cleaners per month, what is the estimated average variable cost? Marginal cost? Total variable cost? Total cost?

d. At what level of output will average variable cost be at a minimum? What is minimum average variable cost?

Reference no: EM131204553

Questions Cloud

How can light pollution be reduced : After you complete the 5 steps and submit your observations to GLOBE at Night, take a screenshot or document that you submitted a reading in some way. What is Light Pollution? What can light Pollution tell us? How can light pollution be reduced?

Health insurance portability and accountability act : The case described in the Introduction is not atypical, even with as much emphasis as there is on information security; it is a good example of where an organization has violated the HIPAA and/or state laws.

Why each one is of interest to you : Based on all the information you are able to recover and your review, what are the three (3) overall conclusions you have drawn about the Preventive Services Covered under the Affordable Care Act?

Explain how these data provide evidence of inefficiency : Econ 3305 - Is the publishing house making the optimal input choice? Why or why not? If not, how should the manager of Largo Publishing House adjust input usage and What is average variable cost?

Engaging in a computer science major : What are the benefits to engaging in a Computer Science major and what fields will allow me to branch out to?

In which book of the bible does vashti appear : In Frances Harper's "Vashti," she uses Biblicial references. In which book of the Bible does Vashti appear? Use the Bible to discuss the significance of those allusions in the poem.

How does fit into your beliefs about your leadership style : Analyze your personal leadership attributes you feel you have that will help you in your graduate nursing role. Also discuss those attributes that you feel you may need to develop in your graduate nursing role.

Design a small network : In a Word document answer the question: How many Point-to-Point serial links could be assigned from this address? Also, list each subnet, and host addresses for each.

User Account

All Pages