Suppose a manufacturing firm acquired a production technology that can be characterized by a learning curve. Every time the firm increase production by one unit, their costs decrease by 10%. The first unit costs them $284 to produce. Prepare a manufacturing cost table up to 15 units and calculate the total cost, marginal cost and average cost. If they receive a proposal to produce and sell 10 units, what is the break-even price? Now, what is the new break-even price for 12 units?
Suppose a manufacturing firm acquired a production technology that can be characterized by a learning curve....
Activity 13.3 - Price Calculation – Breakeven Pricing Often a firm will calculate the break-even point for a price. That is, if we set the price at $X, then how many units will we need to sell to cover costs (that is, our break-even point). Work through the following two examples to gain a better understanding of this approach. Fixed Costs = $10,000 Variable Costs = $10 Using break-even analysis calculate: 1. How many units need to be sold to...
3. Suppose the production of Crocs is characterized by the production function Q = LK, where represents the number of pairs of Crocs produced. Suppose that the price of labor is $10 per unit and the price of capital is $1 per unit. a. Graph the isoquant for Q=121,000. b. On the graph you drew for part a, draw several isocost lines including one that is tangent to the isoquant you drew. What is the slope of the isocost lines?...
Engineering Economics
A manufacturing company is producing a product with variable cost of $6/unit, fixed costs of $70,000, and selling price of $13/unit. a. How many units should the company produce and how much must the sales be to break-even? b. Compute the Marginal Contribution Rate for this line of production. c. The manager demanded $100,000 profit, how many units must the company produce to reach the manager's goal if the variable cost per unit remains $6 and the price...
Firm A produces bags and expects to introduce a new product in a market. Firm A adopts indirect distribution channel in the order of Firm A → Wholesaler → Retailer → Buyer (or Consumer). Q1. If a buyer purchases the new product for $109.99 at retailer, what is unit price did firm A sell the new product to its wholesaler if a 10% mark up on sales on every new product is applied to each channel member? Let's assume that...
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QUESTION 4 Suppose each firm in an industry is characterized by the cost function C(Q) = 2Q + 500. If the entire industry demand for the product is 657 units. The average per unit cost savings having one firm produce all of the units rather than two firms split production is ____? Hint: Write your answer to two decimal places. 10 points QUESTION 5 In a perfectly competitive market, industry demand is: P = 850 – 3.7Q, and industry...
7. Assume that the long-run production function can be expressed as Q-SKL? Where Q is quantity of output, K is the quantity of capital and L is the quantity of labor. If capital is fixed at 10 units in the short run then the short-run production function is: Q=10KL b. Q=50KL? Q=10L? d. 0=50L Q=500KL 8. For a linear total cost function: a. MC will be downward sloping b. MC = AVC c. AVC is upward sloping and linear d....
Often a firm will calculate the break-even point for a
price. That is, if we set the price at $X, then how many units will
we need to sell to cover costs (that is, our break-even point).
Work through the following data and questions to gain a better
understanding of this approach.
QUESTIONS
Start by completing the table below under the assumption that
the product will be sold for $20. (It will be easiest to use Excel
to complete the...
When marginal cost of production rises above the average total cost of production, we know that: A. the firm has economies of scale B. average total cost is decreasing C. marginal cost is negative D. average total cost is increasing Average total cost curves are usually depicted as downward sloping at low levels of output because: A. Average fixed costs are declining B. Opportunity costs decline as output (Q) increases C. Average fixed...
A monopolistically competitive
firm faces the following demand curve for its product: 6 Price ($)
Quantity 10 2 9 4 8 6 7 8 5 12 4 14 3 16 2 18 1 20 10 Refer to the
Table. The firm has total fixed costs of $20 and a constant
marginal cost of $5 per unit. What will the firm do? a) It will
produce 2 units; firms will exit the market in the long run. b) It
will produce...