Applied Question 8.2

At a management luncheon, two managers were overheard arguing about the following statement: "A manager should never hire another worker if the new person causes diminishing returns." Is this statement correct? If so, why? If not, why? Explain answer.

From Professor:Discuss diminishing returns and what happens to marginal product and total product. Are the managers confusing diminishing returns and negative marginal product? Negativemarginal product

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Suppose that a firm is currently employing 10 workers, the only variable input, at a wage rate of $100. The average physical product of labor is 25, the last worker added 10 units to total output, and total fixed cost is $5,000. a. What is marginal cost? b. What is average variable cost? c. How much output is being produced? d. What is the average total cost? e. Is average variable cost increasing, constant, or decreasing?

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Ross Perot added his memorable "insight" to the debate over the North American Free Trade Agreement (NAFTA) when he warned that passage of NAFTA would create a "giant sucking sound" as U.S. employers shipped jobs to Mexico, where wages are lower than wages in the United States....

Q

Gamma Corporation, one of the firms that retains you as a financial analyst, is considering buying out Beta Corporation, a small manufacturing firm that is now barely operating at a profit. You recommend the buyout because you believe that new management could substantially reduce production costs,

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The Largo Publishing house uses 400 printers and 200 printing presses to produce books. A printer’s wage rate is $20, and the price of a printing press is $5, 000. The last printer added 20 books to total output, while the last press added 1,000 books to total output. Is the publishing house making the optimal input choice? Why or why not? If not, how should the manager of Largo Publishing House adjust input usage?

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Please help me on this one! You are planning to estimate a short-run production function for your firm, and you have the following data on labor usage and output: Labor Output 3 1 7 2 9 3 11 5 17 8 17 10 20 15 24 18 26 22 28 21 30 23 A- Does a cubic equation appear to be a suitable specification, given these data? You may wish to construct a scatter diagram to help you answer this question. B- Using a computer and software for regression analysis, estimate your firm short term production function using the data given here. Do the parameter estimates have appropriate algebraic signs? Are they statiscally significant at the 5 percent level? C- At what point do you estimate marginal product begins to fall? D- Calculate estimates of total, average, and marginal products when the firm employs 23 workers? E- When the firm employs 23 workers, is short run marginal cost (SMC) rising or falling? How can you tell??

Q

The economist for the Grand Corporation has estimated the company's cost function, using the times series data to be

The economist for the Grand Corporation has estimated the company's cost function, using the times series data to be
TC=50+16Q-2Q2+0.2Q3

a. Plot this curve for quanties 1 to 10
b. Calculate the average total cost, average variable cost and marginal cost for these quantities, and plot them on another graph.

c. Discuss your results in terms of decreasing, constant and increasing marginal cost. Does Grand cost function illustrate all theses.

Q

  

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