Learning Goal: I’m working on a business writing question and need an explanation and answer to help me learn.

Answer question number 5 from chapter 6, question number 8 from chapter 7 and question number 2 chapter 8. Submit your answer in a Word document.

Chapter 6: The Theory and Estimation of Production

1. What are total, average and marginal product?

2. What is the law of diminishing returns? Provide an example.

3. If you are a manager, why you wouldn’t like the level of production of your firm to be in the stages of production I and III?

4. Explain in your own words how the optimal use of labor occurs when the Marginal Labor Cost equals the Marginal Revenue Product. Generalize your understanding to the use of multiple inputs.

5. What are increasing, decreasing and constant returns to scale?

6. Explain ‘lean manufacturing’ and how this could be applied to your job place.

Chapter 7: The Theory and Estimation of Cost

1. Why managers should differentiate historical costs from replacement costs?

2. Why managers should be aware of implicit and explicit costs?

3. Why sunk costs should not be considered for optimal managerial decisions?

4. Explain how the law of diminishing returns determine increasing marginal costs in the short run.

5. Explain the formulas, shapes and relationships of total costs, total variable costs, total fixed costs, average costs, average variable costs, average fixed costs and marginal costs (Hint: and the shapes (review pages 260-261 and Figure 7.2)

6. How a reduction/increase in the price of labor affect graphs a and b in Figure 7.2?

7. How Supply Chain Management can increase profits?

8. Cost reductions increase profits. Describe 3 out of the 8 ways firms reduce costs (pp. 280-285) and provide your own real examples.

9. Look at Figure 7.11: If the expected demand is 25000 units, what plant size would you recommend installing? Why?

10. Give your own examples of economies of scope and economies of scale.

Chapter 8: Pricing and Output Decisions: Perfect Competition and Monopoly

1. Compare and differentiate the 4 basic characteristics of perfect competitive and monopoly markets.
2. Graphically how a perfectly competitive firm determines the optimum output level? Note: Refer to my lecture.
3. How much profit does a perfectly competitive firm make in the short run and long run?

4. If a perfectly competitive firm is making a loss, should it continue or exit the market?
5. How does a monopoly determine the optimum output level and optimum price?
6.. Can a monopoly make a loss in the short run and long run?

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