where Q = annual output measured in pounds, L = labor measured in person hours, K = capital measured in machine hours. The marginal products of labor and capital are: MPL = 300L-0.4K0.8 MPK = 400L0.6K-0.2 Davy's employees are relatively highly skilled and earn $15 per hour. The firm estimates a rental charge of $50 per hour on capital. Davy forecasts annual costs of $500,000 per year, measured in real dollars. a. b. c. Determine the firm's optimal capital-labor ratio, given the information
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of the output of the goods through additional units while the costs decrease. On the other hand, the economies of scope exists when the firm increase the variety of the goods that it sells with the objective of saving to the total cost in comparing two firms produced of two goods. The economies of scale and scope are all found in the industry wherein it has the large scale of distribution, production, and retail for the process of cost advantage over the only small scale. There many sources of the
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following approaches: 1. Total revenue to total cost 2. Marginal revenue to marginal cost Profit maximization is when the largest amount of profit is made based on output levels and prices. In the total revenue to total cost approach, profit is maximized when the total revenue exceeds total cost by the greatest amount. The profit maximization is going to be found between the two break even points. The break even points are where the total revenue and total cost are equal to each other, but that only includes
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MARGINAL COSTING Introduction: MARGINAL COST: Marginal Cost is the additional cost of producing an additional unit of product. In simple, marginal cost is the extra cost of an extra unit of production. It is the total of all variable costs. It composed of all direct costs and variable costs. The CIMA, London, defines marginal cost “as the amount at any given volume of output by which aggregate costs are changed, if volume of output is increased
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Task 1 1. Total cost is the figure that describes the total cost of production for an organisation. It is made up of both fixed costs, which are costs that are fixed in relation to output, and variable costs, which are costs that vary depending on the level of output. Before production commences, the total costs of the organisation will be the same as the fixed costs, as no raw materials or labour have been utilised. Although when production increases, variable costs will also rise, meaning
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Professor Scholz Economics 101, Problem Set #7 Costs, Adding Demand Curves and Perfect Competition Please complete work on sheet and SHOW your work! Problem 1 Posted: 10/20/2009 Due: 10/27/2009 The following chart represents the production function and cost curves for a firm. a) Please fill in the open squares given the information provided, and answer the related questions below. Assume that labor is paid a constant wage, i.e. our firm is a pricetaker in the labor market. Hint: use your definitions
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Lawns Mowed Per Day | Cost ($11 per hour) | Revenue ($18 per lawn) | 8 | 7 | $88 | $126 | 10 | 9 | $110 | $162 | 12 | 11 | $132 | $198 | 14 | 13 | $154 | $234 | 16 | 14 | $176 | $252 | 18 | 15 | $198 | $270 | 20 | 16 | $220 | $288 | 22 | 16 | $242 | $288 | How many hours should Josh have his employees work? We look at profit, which is revenue minus cost, to try to find a maximum. The maximum profit is at 14 hours of work, mowing 13 lawns, with revenue of $234, cost of $154, and profit
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the university already owned rather than on another tract of land that the university would have to buy. The reason given was that the chosen site lowered the cost of the sporting complex because the land was free, whereas the other site would cost over $3 million. Analyse this reasoning. This example is an example of an opportunity cost. They could have spent $3 million on a block of land that could have possibly been better than the one they own, or they could use that $3 million dollars on
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If one defines incremental cost as the change in total cost resulting from a decision, and incremental revenue as the change in total revenue resulting from a decision, any business decision is profitable if: a. | it increases revenue more than costs or reduces costs more than revenue | b. | it decreases some costs more than it increases others (assuming revenues remain constant) | c. | it increases some revenues more than it decreases others (assuming costs remain constant) | d. | all
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Analysis of cost The role of costs goes far beyond influencing production and profits. Costs affect input choices, investment decisions, and even the decision of whether to stay in business. Is it to hire a new worker or to pay overtime? To open a new factory of expand and old one? To invest in new machinery domestically or relocate production abroad? Bangladesh want to choose those methods of production that are most efficient and produce output at the lowest cost. Analysis of cost is devoted
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