Question

Need homework help in Microeconomics please.

Assignment 7.2 - Application Scenarios 1. Let's assume that we have a firm that produces 2 products, Skilly Wigglers and Juniper Jumpers, at their two rented factories in Waco, Texas. The firm's accountants have put together the following table of costs and as their crackpot, I mean, Cracker Jack economist, they are asking for your advice. Fixed Costs Variable Costs Revenue Skilly Wigglers $2 million $2 million $3 million Juniper Jumpers $2 million $2 million $5 million The accountants have assured us that there are no places to save money. We are at our profit maximizing quantities of each product. We are as efficient as any firm could possibly be, so do not just say lower costs or increase sales. Explain all your answers. If you cannot explain why you are taking an action then you are just guessing. a. How is this firm doing as a whole? How profitable are the two products individually? b. What would you recommend this firm do in the short run? c. What about the long run?

Answer 1

Solution : Assignment 7.2- Application scenarios 1) Given Juniper jumpers 82 million Fixed costs Skilly wigglers $2 million $2 million $ 3 million Variable costs $2 million $5million Revenue @ The film doing as a whole and profitable individually: - considering the Both products together, the firm is breaking even. It is neither earning profits not incassing Coffef. • This is because total cost of both the products together is equal to total revenue; earned from both the products together. Thus, the firm is breaking even.

If we consider the two product individually, then it can be stated that Juniper Jimpers is profitably more valable of compared to skilly wiggless because the firm is earming a profit of $1 million by selling Juniper Jumpers but incurring losses equal to $1 million ky gelling Skilly wigglers. 0 Recommedation of this fim in shortion to do is: * In short ron, the firm should increase production of funiper Jumpers because it is more profitable for the firm to produce Jumpers. on the other hand, the production of skilly wigglers should be reduced to earn higher profte in shorten © In long run In long run the firm should concentrate its resources on.

the production of juniper Jumpers which is more profitable for the firms and will increase its overall profits and wigglers which is leading to Stop production of Skilly losses for the firm