...Islam considers the factors of production as a means using the wealth and the effort of the person to produce commodities in order to maximize his living needs that based on a concept of Halal and Haram, and any means used outside this concept no matter the goods are do not consider production in the view of the Shari’ah.In capitalist economy, the primary right to wealth is enjoyed by the factors of production, but however,in the theory of Islam, the factors of production are not well defined, not is their share in wealth determined in exactly the same way as is done under the Capitalist of economy. In fact, the two ways are quite distinct. From the Islamic point of view, there are four factors of production, which are capital, land, labour...
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...BEB140007 YUNUSMETOV RUSLAN BEA130004 AZRIANNA ALYSSA AZMIL BEE140005 BBC403: MICROECONOMICS FINAL GROUP ASSINGMENT Question 1 (a) With the help of figure, explain three economics concepts that are represented in the production possibilities frontier. (b) The following events occur in the market for Malaysian Airline System (MAS). I. The crash of MAS flight MH17 in Ukraine. II. The wage rate paid to MAS captain and cabin workers decreases. III. The price of Air Asia tickets increase. IV. People expect the price of MAS economic class tickets to fall next school holidays. With the help of figures, explain the effect of each event on the market equilibrium of MAS service. Answer (a) With the help of figure, explain three economics concepts that are represented in the production possibilities frontier. The Production Possibilities Frontier (PPF) shows the various combinations of goods and services produced within the specified time, given available factors of production and state of technology. It is the boundary between the combinations of goods and services that can be produced and the combinations that cannot be produced. Used to explain basic economic concepts: Scarcity, Choices and Opportunity cost. Scarcity is defined as wants always exceeds limited resources to satisfy them. It’s a problem, which faces not only poor people, as well as rich people in order to fulfill their needs...
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...CHAPTER 7 THE COST OF PRODUCTION QUESTIONS FOR REVIEW 1. A firm pays its accountant an annual retainer of $10,000. Is this an economic cost? Explicit costs are actual outlays. They include all costs that involve a monetary transaction. An implicit cost is an economic cost that does not necessarily involve a monetary transaction, but still involves the use of resources. When a firm pays an annual retainer of $10,000, there is a monetary transaction. The accountant trades his or her time in return for money. Therefore, an annual retainer is an explicit cost. 2. The owner of a small retail store does her own accounting work. How would you measure the opportunity cost of her work? Opportunity costs are measured by comparing the use of a resource with its alternative uses. The opportunity cost of doing accounting work is the time not spent in other ways, i.e., time such as running a small business or participating in leisure activity. The economic, or opportunity, cost of doing accounting work is measured by computing the monetary amount that the owner’s time would be worth in its next best use. 3. Please explain whether the following statements are true or false. a. If the owner of a business pays himself no salary, then the accounting cost is zero, but the economic cost is positive. True. Since there is no monetary transaction, there is no accounting, or explicit, cost. However, since the owner of the business could be employed...
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...Total cost Fixed cost Variable cost Average cost Marginal cost Total revenue Average revenue 1. total cost- In economics and cost accounting, total cost (TC) describes the total economic cost of production and is made up ofvariable costs, which vary according to the quantity of a good produced and include inputs such as labor and raw materials, plus fixed costs, which are independent of the quantity of a good produced and include inputs (capital) that cannot be varied in the short term, such as buildings and machinery. Total cost in economics includes the total opportunity cost of each factor of production as part of its fixed or variable costs. The rate at which total cost changes as the amount produced changes is called marginal cost. This is also known as the marginal unit variable cost. If one assumes that the unit variable cost is constant, as in cost-volume-profit analysis developed and used in cost accounting by the accountants, then total cost is linear in volume, and given by: total cost = fixed costs + unit variable cost * amount. The total cost of producing a specific level of output is the cost of all the factors of input used. Conventionally, economists use models with two inputs: capital, K; and labor, L. Capital is assumed to be the fixed input, meaning that the amount of capital used does not vary with the level of production. The rental price per unit of capital is denoted r. Thus, the total fixed costs equal Kr. Labor is the variable input, meaning...
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... 1. : costs that do not vary as a firm varies its output; also called overhead costs. 2. : the increase in output from one more unit of an input when the quantity of all other inputs is unchanged. 3. : the extra cost of producing one more unit of output. 4. : a period of production long enough that producers have adequate time to vary all the inputs used to produce a good. 5. : the property whereby long-run average total costs falls as the quantity of output increases 6. : total revenue minus total cost, including both explicit and implicit costs. Multiple Choice 1. The average total cost of producing 30,000 yards of fabric in a textile factory you manage is $7.60. Your crack team of economists have determined that the marginal cost of producing one more yard of fabric is $7.60. If you decide to expand production by a little bit: a. average cost will rise. b. average cost will remain constant. c. average cost will fall. d. the impact on average cost is unknown. 2. One reason for economies of scale is: a. increased specialization as a firm builds larger factories. b. use of more labor-intensive production processes. c. problems in managing large operations. d. the law of diminishing marginal returns. 3. An industry has firms with long run average cost curves like those shown below. Based on the shape of the curves, we would expect that the industry is composed of firms: a. that are large and few...
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...82476 c02.3d GGS 3/17/09 15:15 r r r r r r r r r r r r r r r r r r r r r r r r r rr ECONOMIES AND SCOPE OF SCALE 2 r r r r r r r r r r r r r r r r r r r r r r r r r rr F ew concepts in microeconomics, if any, are more fundamental to business strategy than economies of scale and the closely related economies of scope. Economies of scale allow some firms to achieve a cost advantage over their rivals. Economies of scale are a key determinant of market structure and entry. Even the internal organization of a firm can be affected by the importance of realizing scale economies. We mostly think about economies of scale as a key determinant of a firm’s horizontal boundaries, which identify the quantities and varieties of products and services that it produces. The extent of horizontal boundaries varies across industries, along with the importance of scale economies. In some industries, such as microprocessors and airframe manufacturing, economies of scale are huge and a few large firms dominate. In other industries, such as apparel design and management consulting, scale economies are minimal and small firms are the norm. Some industries, such as beer and computer software, have large market leaders (Anheuser-Busch, Microsoft), yet small firms (Boston Beer Company, Blizzard Entertainment) fill niches where scale economies are less important. An understanding of the sources of economies of scale and scope is clearly critical for formulating and...
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...Economic Analysis of the Firm – February 1, 2011 • Remember: our big picture objective is… a. To derive cost functions that, ultimately, we can combine with revenue functions to derive profit functions, in order to try and characterize the optimal behavior of the firm. b. Behavior of the average is driven by the marginal on the general production process i. Note how things appear in the Cobb-Douglas world 1. There is no specialization c. The SRPF is upward sloping everywhere. And, the slope of the SRPF is decreasing everywhere. Since the slope is the MPL, it follows that the MPL is decreasing everywhere. d. A derivative is interpreted as a slope. So, if we take the derivative of the SRPF and confirm its positive, we can also take the derivative of the MPL function and confirm its negative. • In deriving cost functions from SRPF… a. Just as we have fixed and variable inputs, it follows that we have fixed and variables costs i. A fixed cost is a cost that doesn’t change regardless of how many outputs (ie: rent, insurance, telephone bills etc…). That is, it is independent of the level of production. In our production setting, fixed costs must be associated with fixed input (K) ii. A variable cost is a cost that varies with the level of production. In our setting, it is associated with Labor. b. That is, to produce more output, increase more variable input aka labor (assuming that labor...
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...Production and Perfect Competition In the first calculation, the total fixed costs = $1,000,000 and the total variable costs equals to $4.4 million, with four million for wages and 50,000 workers multiplied by $80 per worker, plus $400,000 of other variable inputs. The average variable cost equals to $22 million, with total variable costs of $4.4 million divided by 200,000 units. Worker productivity equals to 4, with 200,000 units of output divided by 50,000 workers. The loss is $400,000, with total revenue of 200,000 units of output time’s $25 price, equals to five million minus total cost of $5.4 million. The total cost can be calculated by multiplying the average total cost by 200,000 units of output, or adding the total variable cost to the total fixed costs. For the second calculation, the total fixed cost equals three million. The total variable cost has not changed, still at $4.4 million and the average variable cost will remain at $22. The average total cost equals to $37, since $4.4 total variable costs plus the $3 million of total fixed cost will be divided by 200,000 units of output per day. Worker productivity will stay at four and the loss will be $2.4 million, with total revenue remaining at $5 million and total cost equals $7.4 million. The shutdown rule is that if the firm can cover total variable costs at a certain level of production in the short run, it might keep operating. Fixed costs are not important in the short run because they are sunk...
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...service to customers. Then, the paper will determine ways to reduce costs by determining the process with the lowest breakeven point. Albatross Anchor is a company that manufactures and sells anchors by wholesale. The company founded in 1976, and it grew exponentially to reach more than 100 employees. The company’s production facility and administrative offices are in the same location. Albatross is facing several issues that stand between the company and its success upon the competitors. Company Analysis 1. Costs According to Frank (1998), the cost of producing a unit of a good is the cost associated with production divided by the amount (number) of units produced. The cost of manufacturing for Albatross Anchor is $8 per pound for mushroom/bell anchors and $11 per pound for snag hook anchors. The economies of scale represent the efficiency increase in production as the amount of goods manufactured rises. According to Russell and Taylor (2011) think that economies of scale “occur when it costs less per unit to produce or operate at high levels of output” (p. 259). For that reason companies needs to achieve the lower average unit cost through a higher production because fixed costs are divided by a larger number of goods. Albatross Anchor does not realize economies of scale because of its inability to manufacturer more than usual. The company is inefficient from an operational point of view because it is not able to produce at least at its capacity of manufacturing; they only...
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...ASSESSMENT REFERENCE: ME/JULY12/2 STUDENT NUMBER: 8772637 ANALYZE THE STEPS TOWARDS COST LEADERSHIP WITHIN THE PRODUCTION RELATIONSHIPS OF A MODERN FIRM. Every business entity must strive to develop a competitive advantage in order to continue as a going concern and thrive amidst severe competition in its industry. A firm can master different strategies in order to ensure its continuous growth and corner a good market share in its industry. One of such strategies is the cost leadership strategy, which seeks to offer a product or service to the consumer at the lowest price possible by identifying the cost centres within its operation and buy implementing strategies to reduce its production costs. A firm pursuing a cost-leadership strategy attempts to gain a competitive advantage primarily by reducing its economic costs below its competitors. The ability of a valuable cost-leadership competitive strategy to generate a sustained competitive advantage depends on that strategy being rare and costly to imitate. (Ecofine 2012). In addition, Allen et al. (2007) cited in Strategy BlogSpot (2011) stated that “a cost leadership strategy is effectively implemented when the business designs, produces, and markets a comparable product more efficiently than its competitors. The firm may have access to raw materials or superior proprietary technology to lower costs”. Examples of companies that have mastetered the cost leadership strategy include McDonalds and IKEA. For McDonald's...
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...arithmetic calculation, the overhead rate would decrease; overhead, the numerator, would remain the same, while being spread over a larger denominator, the allocation base quantity 2. What are the causes of excess capacity at ANAGENE? How is this situation different from the causes of excess capacity at BRIDGETON INDUSTRIES? • Initial output was for R&D purposes; production volumes varied more than 100% from month to month • The anticipated cartridge production volumes keep fluctuating • Addressing new markets • At Bridgeton, the death spiral resulted from the continuous outsourcing of their products; this is evident in the changes of their overhead rates from 1988 to 1989 as there were fewer variable costs in the denominator. 3. Should Gerald Kelly even be concerned with the allocation of fixed overhead costs to the cartridges? Why not use variable contribution margin (selling price minus variable costs) for decision making and reporting to the board of directors and analysts? • Selling price of $150 • Reserve capacity • Bad for long-term decisions as the fixed costs need to be covered to make profit • Economic and behavioral arguments...
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...--- | --- | 950 | 50 | 50 | 19 | 9 | 10 | 700 | 75 | 62.5 | 11.2 | 7.2 | 4 | 616.67 | 85 | 70 | 8.80 | 6.43 | 2.38 | 575 | 90 | 75 | 7.67 | 6 | 1.67 | 550 | 110 | 82 | 6.71 | 5.49 | 1.22 | 533.33 | 140 | 91.67 | 5.82 | 4.91 | 0.91 | 521.42 | 75 | 89.29 | 5.84 | 5.04 | 0.8 | 512.5 | 35 | 82.5 | 6.21 | 5.45 | 0.76 | 505.55 | 40 | 77.78 | 6.5 | 5.79 | 0.71 | 500 | 30 | 73 | 6.85 | 6.16 | 0.68 | Cost in dollars Cost in dollars Quantity of output Quantity of output Legend: Blue: Marginal Cost Orange: Average Fixed Cost Black: Average Variable Cost Analysis of the firm A technological change is an enhancement to the production process, making the process of producing a product (bread in this instance) faster, cheaper, and easier. The benefit of a technical change is that the input of factors of productions is more efficiently used, thus a higher...
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...BUS 675 Winter 2014 Midterm 1. What is product-service bundling and what are the benefits to customers? Site some examples Product-service bundling refers to a companies building service activities into its product offerings for its consumers (pg.9) A well-known pioneer in this area is IBM, which is a service business but views its physical goods business as just a small part. Cable/Satellite companies are now those in the Product service bundling business – as they try to build offering that support three main services, TV, Internet and Phone. Due to convenience and pricing tiers customers can save on monthly rates all by contracting with one company and calling one number when needed. The major player that has taken Product service bundling to new levels is Apple. Apple is famous for its major products – Mac’s, IPhones, IPod’s, but has redefined his product-service business in the arena of the Genius Bar and Apple Care. Its been a huge success for its customers and its profits margins as consumers consider physical goods knowing the services are bundled in. 2. Some people tend to use the terms effectiveness and efficiency interchangeably, though we’ve seen they are different concepts. But is there any relationship at all between them? Can a firm be effective but inefficient? Very efficient but essentially ineffective? Both? Neither? Pg 14 Efficiency: Doing something at the lowest possible cost. Effectiveness: Doing the things that will create the...
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...Cost Object: Any activity for which a separate measurement of cost is required. Something for which we want to compute a cost e.g. Product Product Line Department Division Geographical Area Cost unit: Unit of Production / service in relation to which cost are ascertained the unit is what is most relevant for the activity of the organization. Cost Centre: A production or service / location, function, activity or item of equipment for which costs are accumulated. i) ii) iii) Cost Classification. Costs can be classified as Direct or Indirect i) ii) By Function iii) Fixed, variable or mixed (discussed under cost behavior) DIRECT OR INDIRECT: i) Direct Cost (Manufacturing Cost). Those that can be specifically and exclusively identified with a particular cost object. These costs comprises Direct Materials Direct Labour Direct Expenses N.B. Sometimes direct costs are treated as indirect because tracing them to the cost object directly is not cost effective. E.g the cost screws in a car. ii) Indirect Cost (Overheads). Cost of a resource acquired to be used by more than one cost object or running a department but cannot be traced directly or in full to the cost object. N.B. For Stock valuation purposes the cost of a product will consist of a) Prime Cost b) Production Cost c) Total Cost. Cost card Amount $ XX XX XX XX XX XX XX XX XX XX XX XX Direct Materials Direct Labour Direct Expenses Prime cost Variable Factory Overheads Fixed Factory Overheads Factory Overheads....
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...Tesla Motors: SWOT Analysis Tesla Motors designs, develops, manufactures and sells high performance fully electric vehicles, advanced electric vehicle, powertrain components and stationary energy storage systems. Political, economic, socio-cultural and technological factors have influenced Tesla in complex ways since Tesla is a big player in the EV industry – one of the non-traditional automobile industry segments. The political factors have mostly favored Tesla since the government gives subsidies, tax rebates for EV manufacture. The general economic growth in the US economy have favored Tesla but decreasing oil prices and increasing labor prices have acted as threats to Tesla. The go green concepts have favored Tesla but unfamiliarity around the EV technology have posed threats to Tesla. However, limitations by way of battery technologies and charging of batteries have posed threats to Tesla even though technological developments are taking place in the EV industry around battery and charging technologies The overall threats of micro forces is medium based on porter’s 5 forces analysis. The threat for the substitutions is high and threat from rivals is medium due to few rivals who can match the quality of Tesla cars. There seem to be least threats from suppliers since they are not specialized in EV industry and buyers due to direct sales. More details are provided in exhibit 2 as given below The company has established a good value chain by its own network of sales...
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