Essay on operations in hilti company

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Economics Take Home Examination Name Student id Course Date Lecturer Economics Take Home Examination Question 1 You are the manager of a firm selling product X in a competitive market. You consider writing a market report on X. Due to some economic changes, there is significant increase in the wages of workers. Please write a report about the expected effects on the market equilibrium price and equilibrium quantity of product X. the following points help you organize your report: 1. Indicate the effect of this event on supply and / or on demand. 2. Analyse what will happen to market equilibrium price and equilibrium quantity in the short run. 3. If wages are expected to continue at higher levels, analyse what will…show more content…
The supply curve will shift towards left. The following diagram shows that the supply curve S1 has shifted to S2. This has increased the market equilibrium price in the short run from P1 to P2. The quantity traded has decreased from Q1 to Q2. Long‐run market supply curve. The short‐run market supply curve is just the horizontal summation of all the individual firm's supply curves. The long‐run market supply curve is found by examining the responsiveness of short‐run market supply to a change in market demand. As the wages will increase, in the long run the price will reduce and the quantity traded will increase because there will be more entrants into the market and the competition will reduce the price of the product. However, the profit levels will also decreases due to the increase in the wages. Question 2 You’ve been hired by a firm to determine whether it should shut down its operation. The firm currently uses 70 workers to produce 300 units of output per day. The daily wage (per worker) is $40, and the price of the firm’s output is $20. The cost of other variable inputs is $500 per day. The firms fixed cost is $3000 per day. You know that the marginal cost of the last unit is $30. 1. Calculate the firm’s daily losses 2. Should the firm continue to operate at a loss? Carefully explain your answer. Total daily losses are the following: Description Cost /
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