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Applied Problems from Chapters 8 and 9

Applied Problems from Chapter eight and 9 Marquita B. Mouton BUS 640 Managerial Economics Charles Fanning December 6, 2010 Applied Problems from Chapters 8 and 9 The application of fabric is the true check of data. With the assistance of the concepts and theories discovered from Chapter eight and 9, this paper will reply the second utilized downside from Chapter 8 and the second and fourth applied issues from Chapter 9. Chapter 8

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At a management luncheon, two managers have been overheard arguing about the following assertion: “A manager ought to never hire one other employee if the new individual causes diminishing returns.

” Is this statement correct? The situation presented describes a query managers must face every day. It just isn’t wise rent one other workers solely due to them causing diminishing returns. According to the Law of Diminishing Marginal Product, as long as the marginal product does not become negative, it would be clever that a manager rent past the initial diminishing quantity (Thomas and Maurice, 2011).

For example, if 1200 items need to be produced and the 11th particular person employed causes the returns to diminish, then it might be advantageous to the manager to hire enough employees to fulfill the output without causing the marginal product to drop under zero.

Chapter 9 2. The Largo Publishing House makes use of 400 printers and 200 printing presses to produce books. A printer’s wage price is $20, and the worth of the printing press is $5,000. The last printer added 20 books to complete output, whereas the last press added 1,000 books to total output.

Is the publishing house making the optimum enter choice? Why or why not? At the present enter, Largo Publishing House is not making the optimal alternative on input amounts.

With the present inputs, they are underestimating the printers employed. Fifty printers might do the job of 1 printing press machine with a savings of $4,000. 2a. If not, how ought to the supervisor of Largo Publishing House regulate input usage? To maximize output on a fixed finances, Largo Publishing House ought to transfer some of the cash spent on printing presses to the printers.

At 1650 printers and 195 printing presses, mixed they could produce 228,000 books for his or her limited finances. On the other hand, at 1900 printers and 190 printing presses, Largo Publishing could not only produce the identical amount but additionally save $20,000 in the course of. 4. The MorTex Company assembles clothes entirely by hand even though a textile machine exists that can assemble clothes faster than a human can. Workers price $50 per day, and each extra laborer can produce 200 more units per day (i. e. , Marginal product is fixed and equal to 200).

Installation of the first textile machine on the meeting line will increase output by 1,800 units every day. Currently the agency assembles 5,four hundred items per day. 4a. The monetary evaluation department of MorTex estimates that the price of a textile machine is $600 per day. Can management reduce the cost of assembling 5,400 models per day purchasing a textile machine and using much less labor? No it would not be possible to reduce the price of assembling 5,four hundred models per day by buying a textile machine at the present employee wage of $50 per day.

The cost of the entire manufacturing could be $5,400 at any level the place the amount if textile machines increased and the amount of staff decreased. For example, if three textile machines were purchased and the amount of staff was decreased to 72, though totally they might produce 9000 models, it would still value $5400. 4b. The Textile Workers of America is planning to strike for larger wages. Management predicts that if the strike is profitable, the price of labor will improve to $100 per day. If the strike is successful, how would this have an effect on the choice partly a to buy a textile machine?

In half a, if extra the amount of workers decreased and textile machines were bought, MorTex would have been spending the identical sum of money towards their production complete. If the strike is profitable and the workers’ wages elevated from $50 to a hundred, it will be in one of the best curiosity of MorTex to purchase 9 textile machines and layoff all of their workers. If they pursued this selection, they might produce 16,200 models with the same $5,400 they were already spending. References Thomas, C. and Maurice, S. , Managerial Economics: Foundations of Business Analysis and Strategy, Tenth Edition, Published by McGraw-Hill/Irwin, 2010.

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