MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
9th Edition
ISBN: 2810022149537
Author: Baye
Publisher: MCG
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Chapter 5, Problem 14PAA
To determine
To Check:Whether the marginal product of worker is same in both A and B.
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The Boeing Commercial Airline Group (BCAG) recently recorded orders for more than 15,000 jetliners and delivered more than 13,000 airplanes. To maintain its output volume, this Boeing division combined efforts of capital and more than 90,000 workers. Suppose the European company Airbus enjoys a similar production technology and produces a similar number of aircraft but that labor costs (including fringe benefits) are higher in Europe than in the United States. Would you expect workers at Airbus to have the same marginal product as workers at Boeing?
Recently, the Boeing Commercial Airline Group (BCAG) recorded orders for more than 15,000 jetliners and delivered more than 13,000 airplanes. To maintain its output volume, this Boeing division combined efforts of capital and more than 90,000 workers. Suppose the European company Airbus enjoys a similar production technology and produces a similar number of aircraft but that labor costs (including fringe benefits) are higher in Europe than in the United States.
Please explain whether workers at Airbus have the same marginal product as workers at Boeing?
You've been hired by an unprofitable 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 100 ETB, and the price of the firm's output is 30 ETB. The cost of other variable inputs is 500 ETB per day. Although you don't know the firm's fixed cost, you know that it is high enough that the firm's total costs exceed its total revenue. You
know that the marginal cost of the last unit is 30 ETB. Should the firm continue to operate at a loss? Carefully explain your answer.
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