Microeconomics

Marginal Productivity and the Law of Diminishing Marginal Returns

You have recently been hired to manage a movie theater. You observe that there are many customers waiting around the concession area to buy snacks. You also observe that there is only one clerk working the counter. This employee has to do everything from get the popcorn going, stocking condiments and supplies, changing the soda canister when the syrup runs out for fountain drinks, helping customers, fill orders, collect cash, and of course, smile at the customers who have waited lengthy periods of time.

You obtain a report that shows the average sales per weekend night are $500 with one clerk. You decide to hire another clerk for the shift and sales increase to $1,000. You add one more clerk, and sales increase to $1,700. Again, you add another clerk, and sales increase to $1,900. Finally you add one more clerk, and sales increase to $2,000.

1.         Calculate the marginal product associated with each clerk. Draw a table to do this.

2.         At what point did the law of diminishing marginal return become evident?

3.         Why did the marginal product increase as more clerks were added initially?

4.         Why did the marginal product start to diminish?

This is our last discussion of the quarter, it's about the Currency Exchange and its effects on the macroeconomics:

1) Compared to Three (3) other currencies such as Canadian, Euro, China, and Japan (or other currencies you have interest in), please find out if the US Dollar currency has appreciated or depreciated since one year ago?

2) What are the effects of the appreciated/depreciated US dollar to the economy of the United States? State two positive effects and two negative effects.

This is our last discussion of the quarter, it's about the Currency Exchange and its effects on the macroeconomics:

1) Compared to Three (3) other currencies such as Canadian, Euro, China, and Japan (or other currencies you have interest in), please find out if the US Dollar currency has appreciated or depreciated since one year ago?

2) What are the effects of the appreciated/depreciated US dollar to the economy of the United States? State two positive effects and two negative effects.

In each of the following examples, a consumer purchases just two goods: x and y. Based on the information provided, select the set of indifference curves that is the best match.

1. Kieran considers chewing gum (x) to be a perfect substitute for mints (y).

2. In the previous question, what is the marginal rate of substitution between chewing gum and mints? Enter an integer value

3. Maeve will only consume toast (x) with two eggs (y).

4. Efia enjoys both boba tea (x) and sweet tea (y), although she has a slight preference for boba.

Suppose that the market demand for organic specialty rose hip jelly is given by:

? = 500 − 5?

There are only two firms, A and B, producing this product, each at a constant marginal and average total cost of $50.

Find the following for both firms under a Stackelberg market structure with A being the first mover (B reacts to A since A moves first).

A.) A’s Quantity [7]

B.) B’s Quantity [7]

C.) Industry Quantity [5]

D.) Price (this jelly is expensive! That must be a case of 20….) [7]

E.) A’s Profit [5]

F. ) B’s Profit [5]

G.) Industry Profit [5]

H. ) Order expected industry profits from greatest to least: [8]

a. Cournot

b. Collusive Monopoly

c. Bertrand

I. ) Questions regarding Bertrand market structure: [6]

a. What type of market structure does Bertrand resemble? This is in slides.

Hint: it probably the first market structure we talked about.

b. How much are profits under Bertrand?

c. What are firms choosing under Bertrand Market structure (Q or P)? How does this result in incentives that lead to the answer to part b?

Question 2

WEIGHTED AVERAGE METHOD, NONUNIFORM INPUTS, MULTIPLE DEPARTMENTS (LO 1, 2, 3, 4)

Benson Pharmaceuticals uses a process-costing system to compute the unit costs of the over-the-counter cold remedies that it produces. It has three departments: Picking, Encapsulating, and Bottling. In Picking, the ingredients for the cold capsules are measured, sifted, and blended. The mix is transferred out in litre containers. The encapsulating department takes the powdered mix and places it in capsules. One litre of powdered mix converts into 1,500 capsules. After the capsules are filled and polished, they are transferred to Bottling, where they are placed in bottles that are then affixed with a safety seal, lid, and label. Each bottle receives 50 capsules.

During March, the following results are available for the first two departments:

Picking          Encapsulating

Beginning inventories:

Physical units                                        10 litres                  4,000

Costs:

Materials                                               $252                       $32

Labour                                                  $282                       $20

Overhead                                                ?                            ?

Transferred in                                       -                             $140

Current production:

Transferred out                                     140 litres                 208,000

Ending inventory                                   20 litres                  6,000

Costs:

Materials                                               $3,636                    $1,573

Transferred in

Labour                                                  $4,618                    $1,944

Overhead                                                  ?                            ?

Percentage of completion:

Beginning inventory                               40%                       50%

Ending inventory                                   50%                       40%

Overhead in both departments is applied as a percentage of direct labour costs. In the picking department, overhead is 200 percent of direct labour. In the encapsulating department, the overhead rate is 150 percent of direct labour.

Required:

1. Prepare a production report for the picking department using the weighted average method. Follow the five steps outlined in the chapter. Round to two decimal places for the unit cost.

2 Prepare a production report for the encapsulating department using the weighed average method Follow the five steps outlined in the chapter. Round to four decimal places for the unit cost.

3 Explain why the weighted average method is easier to use than FIFO Explain when weighted average will give about the same results as FIFO.

We distribute 15 books among four students so that all allocations are equally likely. What is the probability that

a. the first student gets at least 2 books?

b. the first or the last student gets at least two books?

c. no one gets less than three books?

A machine, costing $30,000 to buy and $2,500 per year to operate, will save mainly labor expenses in packaging over seven years. The anticipated salvage value of the machine at the end of seven years is $5,500.

On a survey taken in 2018 and reported in the GSS data​ file, the​ question, "How much of your communication is via​ text, mobile​ phone, or​ internet?", was asked.

The summary results are as​ follows: Among 202 people who are​ 18-29 years​ old, 69​ reported, "All or almost all of​ it." Among 166 people who are​ 40-49 years​ old, 50​ reported, "All or almost all of​ it."

a. Find the​ 97% confidence interval for the difference between the proportions of those two age groups that​ answerd, "All or almost all of​ it." Include the name of the routine and the margin of error in your answer.

b. Does this data indicate that the population proportion of this issue is different between the two​ groups? Explain.