Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 7, Problem 6MC
To determine
Diseconomies of scale.
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Students have asked these similar questions
FIRM X SPENT $100m to upgrade its equipment last year. this year, the amount represents:
a. An accounting cost
b. An opportunity cost
c. An economic cost
d. A sunk cost
A jeweler has hired a craftsman to make handmade jewelry. All items produced are identical, but the jeweler notes that the 15th item produced costs $425 while the 30th item produced costs $375.
What is the percentage change in labour cost when output is doubled from 15 to 30?
a.-11.8%
b.13.3%
c.-13.3%
d.11.8%
e.88.2%
True or false
The Law of Diminishing returns implies that the marginal cost of production (MC) is increasing as output increases.
Chapter 7 Solutions
Managerial Economics: A Problem Solving Approach
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- What is the per unit opportunity cost of product X as production moves from point A to point F? A) 2/5 B) -2/5 C) 5/2 D) -7/6arrow_forwardExplain what a sunk cost is, what an opportunity cost is, and how each cost should be handled when doing project analysis. Give an example of each type of cost. (Answer the question correctly and in-depth.)arrow_forwardThe per-unit cost of an item is its average total cost (= total cost/quantity). Suppose that a new cell phone application costs $200,000 to develop and only $0.50 per unit to deliver to each cell phone customer. a. What will be the per-unit cost of the application if it sells 100 units? b. What will be the per-unit cost of the application if it sells 1,000 units? c. What will be the per-unit cost of the application if it sells 1 million units?arrow_forward
- a. What is true about output levels 350, 700, 1,050, 1,400, and 1,750?Choices below. (Economic capacity ,Maximum cost, Economies of Scale b. What is the right size of a plant to produce an output of 875? (Plant1,Plant 2, Palnt 3, Plant 4, Plant 5) c. Between what plant sizes does the firm experience economies of scale? (Between plant1 and 3 ,Between plant 3 and 4, Between plant 3 and 5)arrow_forward(i) A business manager determines that t months after production begins on a new product,the number of units produced will be P thousand, where P(t) =6?2 + 5?(? + 1)2.What happens to production in the long run ?(ii) A ruptured pipe in a North Sea oil rig produces a circular oil slick that is y meters thick at adistance x meters from the rupture. Turbulence makes it difficult to directly measure thethickness of the slick at the source (where x = 0), but for x > 0, it is found thaty =0.5(x2 + 3x)x3 + x2 + 4x . Assuming the oil slick is continuously distributed, howthick would you expect it to be at the source?arrow_forward1. Minimize short (K fixed atK ) and long run cost of the following production technologies: a. q = 6K1/4L1/3 b. q = 20K1/2L1/2 c. q = K2L3 2. Derive the Short Run and Long Run Marginal Cost functions and determine whether Marginal Cost is increasing or decreasing with output. Explain why. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward
- Timothy quits his job which pays $84000 a year, to enrol in a 2-year graduate programme. His annual school expenses are $58000 for tuition, $9500 for books and 3600 for food. What core principles are considered in timothy decision making? A snowboard company currently hires 10 skilled employees who are paid a weekly wage of $1,000.00. the cost of capital is $3000 and it is fixed, which means that it does not vary with output. The company is currently producing 240 snowboards. The company’s cost will be $13,500 if it produces an additional snowboard. A customer is willing to pay $550 for the 241st snowboard. Should the company produce and sell it? What core principles are considered in the snowboard company’s decision making?arrow_forward1a) Suppose a firm’s TC = 50Q.75. What is Marginal Cost for the 100th unit of production? Use a spreadsheet or otherwise and incremental analysis (not calculus) to answer this question b) A firm estimates its production function as Q = 2.4 + 30*L -.5*L2 + 30*K -1.00*K2 + 15*F -.3*F2. Total cost is TC = $2.5*L + $2*K + $.75*F. The firm wishes to produce 500 units of output. Use Excel Solver or otherwise to find the cost minimizing amounts of L, K and F. What is the cost-minimizing amount of capital (K)? c) A firm’s production function is: Q = 20L -.5L2. The firm can sell all the output it wishes at $10 per unit. The wage rate for labor is PL=W=$20. a. How much labor should be hired to maximize profits? You can use either a spreadsheet, Solver (or calculus) to find thearrow_forwardWhat's the meaning of "economies of scope"? A. producing at a higher output means incurring lower average cost B. producing at a higher output means incurring higher average cost C. adding product line utilizing the existing resources of the company will reduce the average cost of production D. all are correct E. none is correctarrow_forward
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