Assignment:
I. A firm produces 500 units per week. It hires 20 full-time workers (40 hours/week) at an hourly wage of $15. Raw materials are ordered weekly and they cost $10 for every unit produced. The weekly cost of the rent payment for the factory is $2,250. What is the breakdown of fixed, variable, and total costs? Explain.
II. Total costs increase from $1500 to $1800 when a firm increases output from 40 to 50 units. How much are fixed costs? Explain.
III. You run a game day shuttle service for parking services for the local ball club. Your costs for different numbers of customer are 1: $30, 2: $32, 3: $35, 4: $38, 5: $42, 6: $48, 7: $57, and 8: $68. What are your marginal costs for each customer? If you can charge $10 per ride, how many customers would you want? Explain.
IV. A copy company wants to expand production. It currently has 20 workers who share eight copiers. Two months ago, the firm added two copiers, and output increased by 100,000 pages per day. One month ago, they added five workers, and productivity increased by 50,000 pages per day. Copiers cost about twice as much as workers. Would you recommend they hire another employee or buy another copier? Explain.