MANAGERIAL ECON.+BUS.STRAT.(LL)>CUSTOM<
9th Edition
ISBN: 9781260443646
Author: Baye
Publisher: MCG CUSTOM
expand_more
expand_more
format_list_bulleted
Question
Chapter 6, Problem 1CACQ
To determine
To explain: The optimal method of procuring inputs along with the primary advantages and disadvantages of acquiring inputs with examples.
Expert Solution & Answer
Explanation of Solution
An economic decision taken by the manager of the firm for the procurement of inputs in least possible costs. There are various approaches which can be used by the manager for producing the final product. These approaches are mainlydepending upon the nature of the product and the benefits get from the specialization. If the inputs used in the production of product have well defined and proper quality specifications and also requires highly specialized investments then the optimal procurement method would be 'contract'.
The advantages of this method are that the buyers and sellers both are tie up together because of the specific investment made to facilitate the exchange between them. Also, the chance of supplier taking the benefit of the manufacturer is nullified due to the enforcement of legal obligations.
The disadvantage of this method is that this will increase the opportunism which will increase the transaction costs as manufacturer would not able to take benefit of any fall in the market rate.
The example of this method can be explained as lets there is a local pizza manufacturer who need the dough for the base every morning at a particular time. As commitment for the production has already made, there is specialized investment which is made in advance. The supplier can threaten the manufacturer for not supplying the dough unless they will paythe payment. The supplier may also supply the dough with inferior quality. Hence, with this behavior of supplier,the manufacturer will find it so costly when supplier show opportunism.
Want to see more full solutions like this?
Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
Discuss the optimal method for procuring inputs that have well-defined and measurable quality specifications and require highly specialized investments. What are the primary advantages and disadvantages of acquiring inputs through this means? Give an example not used in the textbook that uses this method of procurement.
Complete all of the following definitions
Focusing only on transportation costs, if a firm pays both the costs of transporting inputs to its plant and the finished product to its customers, the profit maximizing plant location
A. minimizes the sum of the two transportation costs.
B. can be anywhere between the location of the inputs and of the customers because the firm pays both sets of transportation costs.
C. must always be closer to the location of the inputs because transporting inputs is always more expensive than transporting finished products.
D. None of the above answers are correct.
Chapter 6 Solutions
MANAGERIAL ECON.+BUS.STRAT.(LL)>CUSTOM<
Ch. 6 - Prob. 1CACQCh. 6 - Prob. 2CACQCh. 6 - Prob. 3CACQCh. 6 - Prob. 4CACQCh. 6 - Prob. 5CACQCh. 6 - Prob. 6CACQCh. 6 - Prob. 7CACQCh. 6 - Prob. 8CACQCh. 6 - Prob. 9CACQCh. 6 - Prob. 10CACQ
Ch. 6 - Prob. 11PAACh. 6 - DonutVille caters to its retirement population by...Ch. 6 - Prob. 13PAACh. 6 - Prob. 14PAACh. 6 - Prob. 15PAACh. 6 - Prob. 16PAACh. 6 - Prob. 17PAACh. 6 - Prob. 18PAACh. 6 - Prob. 19PAACh. 6 - Prob. 20PAACh. 6 - Prob. 21PAACh. 6 - Prob. 22PAACh. 6 - Prob. 23PAACh. 6 - Prob. 24PAACh. 6 - Prob. 25PAACh. 6 - Prob. 26PAACh. 6 - Prob. 27PAA
Knowledge Booster
Similar questions
- At the profit maximizing level of input use, Which of the following are true? (i) MVP=0 (ii) MVP=MIC (iii) MPP=MVP (iv) MVP=MVICarrow_forwardThe cost of reducing lead contamination of water for BigManufacture Inc. is shown in the table below. BigManufacture Inc currently releases lead in to the local waterways at a concentration of 5 parts per billion. The government regulations sets a limit to the lead pollution at 2 parts per billion accompanied by a $30,000 fine per year for each part per billion beyond the 2 part limit. What is BigManufacture Inc likely to do? Reduction of Lead Cost By 1 part per billion $20,000/year By 2 parts per billion $45,000/year By 3 parts per billion $80,000/year Group of answer choices Reduce lead pollution by 1 part per billion. Reduce lead pollution by 2 parts per billion. Reduce lead pollution by 0 part per billion. Reduce lead pollution by 3 parts per billion.arrow_forwardWith the aid of appropriate diagrams describe what each of the following abatement cost curves are, who is likely to create them, who is more likely to use them and where relevant their advantages and disadvantages against each other: a) Marginal abatement cost curve.b) Expert derived abatement cost curve.c) Model derived abatement cost curve.arrow_forward
- Suppose Alaska could add 1000 MWh of wind generation—which produces for four hours during the nighttime when temperatures are relatively low—or 1000 MWh of solar generation—which produces for four hours in the daytime when temperatures are relatively high. Which one would you have expected to lower total costs of electricity generation more in the summer? Why? Please explain by sketching the daytime and nighttime marginal cost curve for electricity and showing the size of thecost reductions.arrow_forwardIn traditional Economic analysis, Group of answer choices only marginal costs are relevant to current economic decision making. only average costs are relevant to current economic decision making. both marginal and sunk costs are relevant to current economic decision making. only costs that have already been incurred are relevant to current economic decision making.arrow_forwardThree roommates, Jim, Saleem, and Ritesh, are thinking about buying a new speaker system for their apartment. The speaker system would be a public good if they buy them, and the total cost would be $300 which would be shared equally among the three. Jim values it at $80, Saleem values it at $140, and Ritesh values it at $70. If the speakers are purchased each person gets a payoff equal to their net valuation (valuation minus cost share); if they are not purchased each gets zero payoff. a)Is it socially efficient that they buy the speaker system? With reference to the definition of a public good, why or why not? The roommates decide that they will write down their net valuations, and if these reports sum to more than zero, they will buy the TV (sharing the cost equally), or else they will not. b) If all were to report their true valuations, what payoff would each agent earn? c) Show that if Jim and Ritesh submit their true net valuation, then Saleem does better by submitting a false…arrow_forward
- Marginal cost function (C'(q)) and marginal yield function ('R(q)) to extract a smartphone is as follows in the figure where C'(q) , R'(q) are measured in RM/unit and q is quantity (units).The fixed cost of manufacturing such a smartphone is zero. With using the concept of integration, determine: a) the total cost to manufacture 4 units of smartphones. b) function of the total revenue for the smartphone. c)arrow_forwardSuppose that the expected exam scores from studying economics for 0, 1, 2, or 3 hours are 65, 80, 90, and 95 points, respectively, while the expected exam scores for studying 0, 1, 2, or 3 hours of accounting are 50, 65, 70, and 70 points, respectively. With 3 total hours of study time, your combined scores can be maximized by spending _______ hours studying accounting. Group of answer choices A. 1 B. 3 C. 2 D. 0arrow_forwardJims diner is just about to open in memphis, tennessee. however, jim is trying to decide whether he wants to offer coke or pepsi soda products. he determines that, to offer either product, he will have to spend $1500 in sunk costs to purchase and install the appropriate paraphernalia. Ultimately, he chooses to offer coke products and agrees to pay coke 5 cents per ounce of coke sold for the right to use its product. After jim makes the investments specific to his soda choice, coke returns and asks for a fixed (One-time) fee in addition to 5 cents per ounce. What is the most jim should be willing to pay? explainarrow_forward
- Business Unit A, the supplying business unit, is selling to an outside market. It has excess capacity and can use it to transfer product to the receiving business unit, Business Unit B. Business Unit A does not incur incremental fixed costs in the production of the units supplied to Business Unit B. The formula to calculate the transfer price in this scenario is:? a. (Total variable costs + incremental fixed cost) ÷ total units supplied b. (Total variable costs + Contribution margin lost) ÷ total units supplied c. (Total variable costs + incremental fixed costs + Contribution margin lost) ÷ total units supplied d. Total variable costs ÷ total units suppliedarrow_forwardStudent tuition at ABC University is $500 per semester credit-hour. The state supplements school revenue by matching student tuition dollar for dollar. In other words, for each dollar a student pays in tuition, the state pays a dollar that is also considered revenue. Average class size for a typical three credit-hour course is 25 students. Labor costs are $3,000 per class, materials costs the school $25 per student per class and overhead costs are $15,000 per class. For this problem, ABC University measures output as the total amount of revenue generated. a) What is the multifactor productivity performance for a course at ABC University? b) If instructors work an average of 10 hours per week for 16 weeks for each three-credit hour class of 25 students, what is the labor-hours productivity ratio? c) Suppose next year, the tuition increases to $550 per semester credit hour but the state only pays $100 per semester hour instead of the matching it had previously paid. The instructors…arrow_forwardWhich of the following about economies of scale is/are TRUE? One or more than one options may be correct. Answers including the wrong options will be marked as wrong.) a. A profitability decrease in trading and other transaction services results from increased efficiency when Fls perform these services. b. Economies of scale helps Fls solve the information asymmetry problem in direct finance. c. A cost reduction in trading and other transaction services results from increased efficiency when Fls perform these services. d. None of the options are true. e. A cost reduction in trading and other transaction services results from stable efficiency when Fls perform these services.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning