Question

In January 2009, Vaughan-Bassett, a manufacturer of bedroom furniture, suspended work at its Elkin, North Carolina, plant, laying off 400 workers. Eight months later, with sales up by 10%, the company reopened part of the Elkin plant to finish furniture produced at its main plant at Galax, Virginia. Vaughan-Bassett easily found workers to staff the reopened plant.

Answer these questions:

1. How do sales of new and existing residential housing affect the demand for furniture?
2. How would the appreciation of the Chinese yuan against the U.S. dollar affect the North Carolina furniture industry?
3. In the face of falling demand, how should Vaughan-Bassett decide between suspending (“mothballing”) a plant and closing it permanently
4. Using suitable, short-run demand and supply curves, illustrate the shifts in the market equilibrium between January and September 2009.

Answer 1

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