Sketch the isocost line representing the new minimum cost, Business Management

Assignment Help:

He works at a local coffee shop for wage of $7.50 per hour.  The job is very flexible; he can work there as many hours as he wants.

When he's not working at the coffee shop, Bill assembles and sells widgets with the help of his friend Ted, whom he pays $10 per hour. Bill's labor (LB) and Ted's labor (LT) are imperfect substitutes (Bill and Ted have somewhat different skills and their labor is somewhat complementary in the production process).  The isoquant for assembling q=10 widgets per day is shown in the graph below.  Also shown in the isocost line representing Bill's current economic cost (C1) of assembling q=10 widgets, given the wage he currently pays Ted and the implicit cost of his own labor, along with Bill's current cost-minimizing bundle of labor inputs (LB1 and LT1).

Suppose that Bill gets promoted to manager at the coffee shop and his wage goes up from $7.50 to $15.00 per hour. Show graphically and describe verbally the effect that this has on Bill's choice of labor inputs in his widget-assembly business.  Assume that Bill continues to produce 10 widgets per day, that he chooses an input bundle that minimizes the economic costs of production, and that both Bill's and Ted's hours are flexible (Bill can still divide his time between the coffee shop and widget assembly however he wants; Ted has nothing else to do and will work as many or as few hours as Bill wants him to at the wage of $10 per hour.)

In particular:

A.  Explain in words why Bill's raise at the coffee shop is relevant to his choice of inputs in his widget assembly business.

B.  Sketch the isocost line representing the new minimum cost (C2) of assembling 10 widgets (it does not need to be drawn exactly to scale).  Label the endpoints.

C.  Label the new optimal bundle of inputs on the graph.

D.  What happens to the number of hours that Bill and Ted each work at widget assembly per day?


Related Discussions:- Sketch the isocost line representing the new minimum cost

Define the term quality, Quality Management Principle 1. Define the ter...

Quality Management Principle 1. Define the term Quality. 2. What is the objective of Reliability? Discuss various issues involved in ensuring Reliability. 3. What are the

Elaborate on the social responsibilities of business, QUESTION 1 Democr...

QUESTION 1 Democracy on its own does not generate good governance unless it is liberal and consolidated. Discuss QUESTION 2 (a) Describe the relationship between the gr

Diversity management, The role that diversity plays in the workplace has in...

The role that diversity plays in the workplace has increased over time as more companies adopt diversity management strategies in an effort to increase performance or attract new e

Total productive maintenance, This is innovative approach of maintenance d...

This is innovative approach of maintenance developed by Japanese manufacturers for their plants and machinery. In this concept the principle of all the above there method

Differentiate between a work group and a work team, Problem: (a) Diff...

Problem: (a) Differentiate between a work group and a work team. (b) Explain clearly the different types of team in organisation. (c) Referring to your organization o

Explain the contents of an application form, Question 1: (a) Clearly ex...

Question 1: (a) Clearly explain the Recruitment methods used by organisations. (b) Explain the contents of an application form. Question 2: (a) What do you meant by

Advantages of a good material handling systems, Advantages  of a Good Mater...

Advantages  of a Good Material Handling  Systems:  The followings  advantages  are availed from  an efficient material  handling  system. 1.  A good  material  handling sys

Naughty Rule, Ask question “Naughty Rule”#Minimum 100 words accepted#

Ask question “Naughty Rule”#Minimum 100 words accepted#

Explain the different roles that managers must play, QUESTION Managers ...

QUESTION Managers are directly responsible for the success or failure of any organization. Their main responsibility is to help the organization to achieve its objectives in an

Analyze the weaknesses of the eia system, "In the past two decades Mauritiu...

"In the past two decades Mauritius has experienced an unprecedented boom in the tourism industry. Tourism activities are mostly concentrated on the coastal zone and over 90% of th

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd