You have been hired by Kia as manager for its Pakistan operations. Assume following is the short-run production function at their assembly plant outside Karachi: Q = 10L2 – 0.5 L3 where L is variable input labor, Q is output of Cars assembled a. At the end of the year it is expected that output will double with purchase ofnew equipment and machinery. The production function is estimated to be Q = 60L.30K.70 where L is labor and K is capital. Suppose initial L1 = 1 and K1 = 1. When inputs are in increased to L2 = 2 and K2 = 2, do you observe increasing, decreasing or constant returns to scale? b. Assume Kia Head Office is considering hiring more laborers either at their Gwadar plant or alternatively at the Karachi plant. What will be your advice if workers’ marginal product is 40 at wage of Rs=5/hour in Karachi and marginal product is 28 at wage of Rs=4/hour in Gawdar?
Customary Pricing
There are various types of pricing strategies followed in the market. They are psychological pricing, odd pricing, free onboard pricing, customary pricing, prestige pricing, dual pricing, ruling pricing, negotiated pricing, mark up pricing, etc. each one can be explained as follows:
Multiple Unit Pricing
“Multiple-unit pricing is a practice where a company offers consumers a lower than unit price if a specified number of units are purchased.”
You have been hired by Kia as manager for its Pakistan operations. Assume following is the short-run production function at their assembly plant outside Karachi:
Q = 10L2 – 0.5 L3 where L is variable input labor, Q is output of Cars assembled
a. At the end of the year it is expected that output will double with purchase ofnew equipment and machinery. The production function is estimated to be
Q = 60L.30K.70 where L is labor and K is capital.
Suppose initial L1 = 1 and K1 = 1. When inputs are in increased to L2 = 2 and K2 = 2,
do you observe increasing, decreasing or constant returns to scale?
b. Assume Kia Head Office is considering hiring more laborers either at their Gwadar plant or alternatively at the Karachi plant. What will be your advice if workers’ marginal product is 40 at wage of Rs=5/hour in Karachi and marginal product is 28 at wage of Rs=4/hour in Gawdar?
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