operations in hilti company Essay

1045 Words Mar 14th, 2014 5 Pages
Economics Take Home Examination
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Economics Take Home Examination
Question 1
You are the manager of a firm selling product X in a competitive market. You consider writing a market report on X. Due to some economic changes, there is significant increase in the wages of workers. Please write a report about the expected effects on the market equilibrium price and equilibrium quantity of product X. the following points help you organize your report:
1. Indicate the effect of this event on supply and / or on demand.
2. Analyse what will happen to market equilibrium price and equilibrium quantity in the short run.
3. If wages are expected to continue at higher levels, analyse what will
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Then, if marginal revenue is greater than marginal cost at some level of output, marginal profit is positive and thus a greater quantity should be produced, and if marginal revenue is less than marginal cost, marginal profit is negative and a lesser quantity should be produced. At the output level at which marginal revenue equals marginal cost, marginal profit is zero and this quantity is the one that maximizes profit. In this case, the marginal profit is negative as according in competitive market marginal revenue is equal to price hence, it is $20 and marginal cost being $30, this equals to -$10. The company should not operate at a loss.
Question 3
Given the data of the last question (2), the owner of the firm suggested that losses can be reduced by firing some workers. If you found that the marginal product of the 70th worker was 4units of output per day, do you agree with the owner to reduce employment in order to reduce losses? Please explain carefully.
The marginal product of labour is the change in the output compared to the change in the number of labour. Hence, the 70th labour is producing 4 units per day according to the data given in the question. The marginal product of labour is 4. In order to determine the demand of labour, the value of marginal

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