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Break even point and operating leverage

(Break even point and operating leverage) Allison radio manufacture a complete line of radio and communication equipment for law enforcement agencies. The average selling price of its finished product is $180 per unit. The variable cost for the same units is $126. Allison radio incurs fixed cost of $540,000 per year. a) W

Short Run Production Decisions - Price Decline

A firm produces 10 units per week at a price of $500 each. With AFC of $100 and AVC $350 per unit, the firm is earning economic profits of $500 per week. If the price of the product declines to $400, should the firm continue to produce this product? Explain your answer.

Cobb-Douglas production function mathematical relationships

This is an analytical exercise from my macroeconomics book chapter 4, The Theory of Economic Growth. I need help in answering these questions in order to be better understand this model. (1) Consider the Cobb-Douglas production function Y/L = (K/L)^α (E)^1-α Show that multiplying both sides of this expressio

Managerial Accounting Break Even Point

The following monthly data in contribution format are available for the MN Company and its only product, Product SD: Total Per Unit Sales $83,700 $279 Variable expenses 32,700 109 Contribution margin 51,000 $170 Fixed expenses 40,000 Net operating income $11,

Managing in Monopolistic and Competitive Markets

You are the GM of a firm that manufactures PC's. Demand for them has dropped 50%, thanks to a soft economy. The sales manager has identified only one potential client, who has received several quotes for 10000 new PC's. According to the sales manager, the client is willing to pay $650 each of the 10000. Your production line

Determining Stage II of Production Function

Given the Production Function: Q = 21X + 9X2 - X3, where Q = Output, and X = Input . At what value of X does Stage II of the production function begin? a. Stage II begins at X = 4.5 b. Stage II begins at X = 10.5 c. Stage II begins at X = 21 d. Stage II begins at X = 9 e. none of the above

Production Level

Use the following equation to demonstrate why a firm producing at the output level where MR=MC will also be able to maximize its total profit (i.e. be at the point where marginal profit is equal to zero). P=170-5Q TC=40+50Q+5Q^2

Linear Prodcution Possibilities Frontier

Draw a linear PFF representing the tradeoff between hot dogs and buns with 120 million workers available. At the start of this particular economy, 120 mil workers are employed. 30m hot dogs and 30m buns are produced each day, which employs 60m workers for each. Improved technology brings about an increase in productivity;

Consumer Price Index

What are the strengths of the CPI? What are the characteristics of these strengths? Same for weaknesses? If the CPI is imperfect why do we use it?

Net Loss From A Merger

Consider a market that is initially served by two firms, each of which charges a price of $16 and sells 100 units of the good. The long-run average cost of production is constant at $15 per unit. Suppose a merger will increase the price to $20 and reduce the total quantity sold from 200 to 150. A. What is the consumer surplu

short term production function

2. An economist for a widget company estimated the following short term production function. Q = 7 V + 0.6 V² - 0.1 V³ Where Q is the number of widgets produced per day and V is the number of production workers working and 8 hour day. a. Develop a production function with V = 0, 1, 2,.................. 10 b. Calcula

Labor/Capital Mix - Cobb Douglas: Suppose a firm assumes the following production function: Log Q=2 + .8 log K + .1 log L a) Currently, the firm hires 10,000 workers and employs 50 units of capital. The "wage" of capital and labor are $500 and $800 respectively, what would you suggest would be the firm's mix of labor and capital if it produces 2,000,000 units? b) Is this an example of a Cobb-Douglas Production function? c) Would you suggest this firm merge with similar firms? Explain.

Suppose a firm assumes the following production function: Log Q=2 + .8 log K + .1 log L a) Currently, the firm hires 10,000 workers and employs 50 units of capital. The "wage" of capital and labor are $500 and $800 respectively, what would you suggest would be the firm's mix of labor and capital if it produces 2,000,000 units

The Production Function and Cost Analysis

1. The attached table summarizes the short-run production function for your firm. Your product (Q) sells for $50 per unit, labor (L) costs $5 per unit, and the rental price of capital (K) is $25 per unit. Lastly, assume capital and labor are used only in whole units, i.e. it is not possible to use 1.37 units of capital or labor,

Sample of the Market Trends

Charlie loves watching Teletubbies on his local public TV station, but he never sends any money to support the station during their fundraising drives. What name do economists have for Charlie? How can government solve the problem caused by people like Charlie? Can you think of ways the private market can solve this problem? H

Optimal Production Level: Building a Playground Swing

1. The production function to build a playground swing is: Q = 15 + 8L - 0.6L2 Where: Q is the total number of swings built in an hour L is the labor of one worker If it costs $10 per hour for a laborer and each swing is sold for $20 and there are no material costs, how many laborers should you hire? How many swings

Macroeconomics - Production Function

A countries production function is Y=5K^.5 L^.5 Assume that the rate of depreciation as well as the rate of saving are each .10. Also assume that there is no technological nor population growth. A. What is the steady state level of capital per worker? B. What is the steady state level of output per worker? C. Suppose that t

Cost of production

1.If MC is increasing, what is happening to the ATC? Why is this happening? a. What does the law of diminishing returns have to do with the shape of the AVC and ATC curves? Explain why those curves are U-shaped. b. Why does the ATC curve always lie above the AVC curve? Why does the two curves move closer together, but

Economies and diseconomies of scale

1 Explain the relationship between AP and MP. Be sure to use graphs to help support your answer. a Explain the relationship between MP and TP when b. TP has peaked c. TP is declining d. The MP is declining, but still positive. e Suppose that 1 worker generates 8 units of output, 2 workers generate 20, 3 workers ge

Production Function

Given a firm's production function as Q = 5 L1/2 - 0.1L and its average revenue function as AR = 768 - 3Q, determine the marginal productivity of labor, MPL and the value of L for which it will be zero. Does the production function exhibit the property of diminishing marginal productivity of labor? Determine the marginal reven

Linear Programming problem- Maximizing profits

A manufacturer of outdoor clothing makes wax jackets and trousers. Each jacket requires 1 hour to manufacture, whereas each pair of trousers takes 40 minutes. The material for a jacket cost £32 and those for a pair of trousers cost £40. The company can devote only 34 hours per week to the production of jackets and trousers,

Patent System

Government involvement in general scientific research has been justified on the grounds that advances in knowledge are public goods- once produced, information can be shared at virtually no cost. A new production technology in an industry could be available to all firms, reducing costs of production, driving down price, and bene

Production Function and Total Product of Labor

See the attached file for further details. A firm's production function is given by: Q= Le^-0.2L Find the value of L which maximizes the TOTAL PRODUCT of labor. In obtaining this result ensure that you: (a) Derive the first-order condition for the firm's product maximization. (b) Verify that, at the critical point, t

Income statement - Variable costing

See attached file for full problem description. Cannondale bikes manufactures a basic road bicycle. Production and sales data for the most recent year are as follows(no beginning inventory): Variable production costs $90 per bike Fixed production costs $450,000 Variable selling & administrative

The theory and estimation cost.

3. Explain the relationship between firm's short- run production function and its short-run cost function. Focus on the marginal product of an input and the marginal cost of production. 1. Base on your knowledge of the definition of the various measures of the short-run cost, complete this table. Q TC TFC TVC AC AFC