Question1. The Largo Publishing House uses 400 printers and 200 printing presses to manufacture books. A printer’s wage rate is $20, and the price of a printing press is $5,000. The last printer added 20 books to total output, while the last press added 1,000 books to total output. Is the publishing house making the optimal input choice? Why or why not? If not, how should the manager of Largo Publishing House adjust input usage?
Question2. The MorTex Company assembles garments entirely by hand even though at textilema- chine exists which can assemble garments faster than a human can. Workers cost $50 per day, and each additional labourer can produce 200 more units per day (that is, marginal product is constant and equal to 200). Installation of the first textile machine on the assembly line will raise output by 1,800 units daily. Currently the firm assembles 5,400 units per day.
i. The financial analysis department at MorTex estimates that the price of a textilema- chine is $600 per day. Can management reduce the cost of assembling 5,400 units per day by purchasing a textile machine and using less labour? Why or why not?
ii. The Textile Workers of America is planning to strike for higher wages. Management predicts which if the strike is successful, the cost of labour will rise to $100 per day. If the strike is successful, how would this influence the decision in part to purchase a textile machine? Elucidate
Question3. When McDonald’s Corp. reduced the price of its Big Mac by 75 percent if customers as well purchased French fries and a soft drink, The Wall Street Journal reported that the company was hoping the novel promotion would revive its U.S. sales growth. It didn’t. In two weeks sales had fallen. By using your knowledge of game theory, what do you think disrupted McDonald’s plans?
Question4. Illustrate and answers in economic terms a managerial decision you have knowledge about (for example, the oil and Gas Industry). Some examples of decisions are:
• Must a company hire temporary workers or hire new workers to handle increase demand for the company's product?
• Must a factory buy a new machine or upgrade the old one?
• What is the optimal level of parts one should order and keep on the shelf?
• Must one lease or buy a car?
• Must one rent or buy a house?
• What must one consider when starting a new business?