a. Suppose you manage a factory that has two plants. Your data shows that plant X...

a. Suppose you manage a factory that has two plants. Your data shows that plant X produces more output per day compared to plant Z. As a result of this data, you decide to place all new hires at plant X. Have you made the right decision? If you made the right decision explain why. If you did not make the right decision, explain how you should make the decision.

b. Suppose the prices of some goods goes up. Does this mean that all consumers will spend more on their day to day living? Explain.

Solutions

Expert Solution

A) no. If all the new workers are placed at one plant then the marginal product, which is diminishing because of diminishing marginal returns to a variable factor, will continue to decline and will fall below the market wage. The optimal hiring rule indicates that hiring should be done till the point where the value of the marginal product is equal to the wage rate. This indicates that a hiring is optimal in both plants only when the value of the marginal product gets equal to the wage rate

B) it does not mean that consumer will have to spend more on their day to day living. this is because consumer basket is composed of several goods and services in which some will be now priced high what the price of some other goods might have reduced. Some consumers might not be purchasing these highly priced goods and services at all. Therefore it depends upon the consumer basket whether their cost of living increases.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

a. Suppose you manage a factory that has two plants. Your data shows that plant X...

Exercise 2. Two plants A firm has two plants, both with increasing marginal costs. Plant 1...

Exercise 2. Two plants A firm has two plants, both with increasing marginal costs. Plant 1 is more efficient than plant 2. Specifically, the cost function in plant 1 is c1(y1)=2y12, while the cost function in plant 2 is c2(y2)=3y22. Output produced in plant 1, y1, is identical to output produced in plant 2, y2. For any overall output level Y=y1+y2the firm wants to minimize costs. What is the marginal cost in plant 1? Find ∂c1/∂y1. What is the marginal...

Suppose that one factory inputs its goods from two different plants, A and B, with different...

Suppose that one factory inputs its goods from two different plants, A and B, with different costs, 4 and 6 each respective. And suppose the price function in the market is decided as p(x,y)= 100−x−y where x and y are the demand functions and 0≤x,y. Then as x= y= the factory can attains the maximum profit,

Suppose that one factory inputs its goods from two different plants, A and B, with different...

Suppose that one factory inputs its goods from two different plants, A and B, with different costs, 4 and 6 each respective. And suppose the price function in the market is decided as p(x,y)= 100−x−y where x and y are the demand functions and 0≤x,y0. Then as x= y= the factory can attains the maximum profit,

1) A book manufacturing company has two different production plants, plant A and plant B. 40%...

1) A book manufacturing company has two different production plants, plant A and plant B. 40% of books come from plant A. Of the books that come from plant A 30% are defective and 70% work as intended. Of the books from plant B 10% are defective and 90% work as intended. On top of this 10% of the defective books from plant A explode. A) Draw a tree diagram of this data. B) What is the probability of randomly...

A manufacturer of automotive gaskets has two plants, A and B. Plant A manufactures 65 %...

A manufacturer of automotive gaskets has two plants, A and B. Plant A manufactures 65 % of the gaskets and plant B manufactures 35 %. Because of a batch of faulty material from a company supplying both plants, 3% of the gaskets are of sub-standard quality from plant A and 5% are sub-standard from plant B. Despite your internal quality control procedures, you still had a sub-standard gasket returned from one of your customers. What is the probability it came...

You manage an ice cream factory that makes two flavors: Creamy Vanilla and Continental Mocha. Into...

You manage an ice cream factory that makes two flavors: Creamy Vanilla and Continental Mocha. Into each quart of Creamy Vanilla go 2 eggs and 3 cups of cream. Into each quart of Continental Mocha go 1 egg and 3 cups of cream. You have in stock 500 eggs and 900 cups of cream. You make a profit of $3 on each quart of Creamy Vanilla and $2 on each quart of Continental Mocha. How many quarts of each flavor...

You manage an ice cream factory that makes two flavors: Creamy Vanilla and Continental Mocha. Into...

You manage an ice cream factory that makes two flavors: Creamy Vanilla and Continental Mocha. Into each quart of Creamy Vanilla go 2 eggs and 3 cups of cream. Into each quart of Continental Mocha go 1 egg and 3 cups of cream. You have in stock 400 eggs and 750 cups of cream. You make a profit of $3 on each quart of Creamy Vanilla and $2 on each quart of Continental Mocha. How many quarts of each flavor...

You are on a factory visit to a plant for food products. Rushing through the factory,...

You are on a factory visit to a plant for food products. Rushing through the factory, you hear that a vapor compression cycle with refrigerant HFC-134a as the working fluid is being used. You see that they use a throttle valve as part of the system and that one part of the cycle is running at 0.32 MPa and another part of the cycle is running at 1.6 MPa. If the compressor is 80% efficient and throttle, condenser, and evaporator...

Suppose a manufacturing firm has two factories (Factory 1 and Factory 2), and a single production...

Suppose a manufacturing firm has two factories (Factory 1 and Factory 2), and a single production process (Process A) that is used in both factories. A new process (Process B) is developed that potentially reduces production costs. To test whether Process B is less costly than Process A, an experiment is designed where: Within each Factory, products are assigned randomly to Process A or Process B. Production costs for each product are recorded. Note that resources (i.e. materials, workers, equipment)...

Subjects