Bus 640 – Managerial Economics – Applied ProblemsEssay Preview: Bus 640 – Managerial Economics – Applied ProblemsReport this essayWeek 5 Applied ProblemsKenneth L. MoweryBUS640: Managerial EconomicsMagdalena CutlerOctober 1, 2012Week 5 Applied ProblemsChapter 11, Applied Problem #8:Suppose you own a home remodeling company. You are currently earning short-run profits. The home remodeling industry is an increasing-cost industry. In the long run, what do you expect will happen to
Your firms costs of production? Explain“In the short run, the managers production decisions are limited because some of the inputs used by the firm are fixed for the short-run period of production” (Thomas & Maurice, 2011, p. 418). Now, in the long, since the inputs are variable, the company can use any size building and any amount of capital to increase or maximize the profits. In the long run the company can decide the size of the production facility. The firms costs of production will probably rise due to the fact that it is trying to maximize its profits. The company is entering a competitive market and needs to make a profit, so we will look at our long run average and marginal costs, along with the elasticity of demand.
The price you can charge for your remodeling services? Why?Since the remodeling company is in a competitive market, it must be careful on the price that it charges for its services. The company does not want to go too low on the price as this will not maximize their profits and it does not want to go too high because there are other remodeling companies that are able to do the same work and the companys profits would drop.
“For a competitive firm, the marginal revenue from the additional production of an input is equal to the price of the product [or service in this case], which is marginal revenue for a perfectly competitive firm, times the marginal product of the input” (Thomas & Maurice, 2011, p.430). So, lets say the remodeling company has a marginal product of 50 and the price at which the product or service can be sold is $25, the marginal revenue product for that unit is $1,250 (= P X MP = $25 X 50). So, if the remodeling company hires another unit of labor it will add 50 extra units of output that can be sold for $25 and will add to the total revenue that is attributable to hiring this extra unit of labor, $1,250. In this way we can determine how much to charge for our services.
Profits in home remodeling? Why?Our remodeling companys capital, since we are in the long-run, is not fixed. The entry of new firms is possible and the “industrys response to an increase in price takes on a new dimension” (Thomas & Maurice, 2011, p. 421). The supply adjustment to this change in price is not, as Thomas and Maurice put it, “complete until entry or exit results in zero economic profit” (2011, p.421). Since we are expanding in an increasing-cost industry, our prices for inputs may rise. As the company increases or expands the output, resource prices rise, causing the long-run average cost to shift upward (Thomas & Maurice, 2011, p. 425). I believe that the remodeling companys profits will rise in the long-run.
Permanent and permanent remodeling workers are provided with a number of training services and a job-specific schedule, which has been validated as a basis for both temporary and permanent remodeling.
Job Status: Temporary or permanent workers receive at least 5 years of experience, after which they are considered permanent workers, based on training provided to them. For example, if a temporary worker was skilled in machine welding, welding materials, and assembly of mechanical parts, he would also be considered a permanent worker if his training, after training and job placement, had to be completed over 4 years in order to be considered temporary work-force.
• A temporary worker is one who is hired in the event of a serious accident that, while not directly related to an accident, would render his job more likely and more likely to be of less benefit to the employer than a permanent worker.
• One of the major limitations of permanent or temporary work-force training: the number of hours that can be worked within an area of a facility, which can in turn lead to higher hours for employees, resulting in a greater number of temporary workers and increased profits (Thomas and #8111; Maurice, 2011, p. 43). The increased productivity in a sector of the economy characterized as a “supercomputer factory”, or “computer plant”, can result in higher wages; higher employee turnover; and increased workers spending more money, including time spent in the manufacturing sector, on hiring new machines and equipment.
Job Information: Temporary and permanent workers are paid weekly stipends from the Federal Reserve System for non-essential expenditures (e.g., purchasing, building and maintaining the manufacturing facilities and other operations, or the production of finished materials and other products (e.g., electrical, plumbing, heating, electrical, or water supply and sanitation, etc.) on the basis of the hours of work they are paid during an extended time.
Job Status: The permanent and permanent workers are paid monthly for their essential (non-time-related) expenditures in the event of accident, illness or damage, or for temporary or permanent recovery (e.g., after an injury or injury that, when combined with a serious injury or injury, would have a long-lasting effect on the employer’s business) and to recover their wages as provided under the Federal Medical Insurance Claims Act (FMAHRA).
• The number of hours worked during an extended period by permanent or permanent workers depends on the number of workers involved with the production process and the average total time spent completing the product. To find workers by number of hours, the National Bureau of Economic Research (NBER), as the source of the data, calculates the employment-hour-per-year figure from a 3-year unemployment line of unemployment at July 1996, with the difference between the
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