Problem set on Production and Cost

PROBLEM SET #2 (Due 10/29 at 2359hrs)

1. Production and Cost The following represents the output per worker for kite production. Assume fixed plant size (constant capital), with a fixed cost of $20. A kite sells for $10; unskilled workers earn $5/hour and skilled workers earn $15/hour. Assume for simplicity that workers work one hour.

Don't use plagiarized sources. Get Your Custom Essay on
Problem set on Production and Cost
Just from $9/Page
Order Essay

UNSKILLED WORKERS

Worker

Total Product (per hour)

1 5

2 8

3 10

4 11

5 12

6 12

SKILLED WORKERS

Worker Product (per hour)

Total Product (per hour)

1 8

2 14

3 19

4 22

5 24

6 25

 

 

a) Assuming there are only unskilled workers, how many workers will the firm hire to maximize profit? Why? What are the firm’s Total Cost, Total Revenue, and Profit?

b) Assume there are both unskilled and skilled workers, working in separate factories (each with the same fixed cost). How many workers of each kind will the firm hire to maximize profit? Why? What are the firm’s Total Cost, Total Revenue, and Profit?

c) Assume the government imposes a minimum wage of $11/hr. How many unskilled workers and skilled workers, will the firm hire, in order to maximize profit? What are the firm’s Total Cost, Total Revenue, and Profit?

 

 

2. Revenue and Elasticity Amazon.com is trying to increase its total revenue. It explores a 10% discount on its products. Based on internal research, amazon knows that its customers can be divided into two distinct groups (Prime and Others). The following table shows how the two groups respond to the discount (amounts are sales/week). Assume that all products sold cost the same (production and price).

a) Calculate the price elasticity of demand for Prime Customers and for Others.

b) Explain how the discount will affect total revenue from each group.

c) In order to maximize revenue, should discounts be offered to Prime Customers only, to Others only, to neither, or to both? Why?

3. Price Discrimination A ski resort caters to both out-of-town skiers and local skiers. The demand for lift tickets for each market segment is independent of the other market segment. The marginal cost of servicing a skier of either type is $40. The demand formulas for the two market segments are:

Out-of-towners: Qo=1000-5P Locals: QL=1000-10P

(a) Assume that the resort charges one price to all skiers. What is the total demand curve? What is the profit-maximizing price? How many tickets will be sold to each group? What are the total revenue, total cost, and profit from the two combined markets?

Amazon Prime Customers

Others

Volume of sales before the 10% discount

1.50 million 1.55 million

Volume of sales after the 10% discount

1.70 million 1.65 million

 

 

(b) Assume that the resort charges a different price to locals than it does to out-of-town skiers. What is the profit-maximizing price for each group of consumers? How many tickets will be sold to each group? What is the combined profit with price discrimination? Show all calculations.

Order a unique copy of this paper
(550 words)

Approximate price: $22

Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

We value our customers and so we ensure that what we do is 100% original..
With us you are guaranteed of quality work done by our qualified experts.Your information and everything that you do with us is kept completely confidential.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

The Product ordered is guaranteed to be original. Orders are checked by the most advanced anti-plagiarism software in the market to assure that the Product is 100% original. The Company has a zero tolerance policy for plagiarism.

Read more

Free-revision policy

The Free Revision policy is a courtesy service that the Company provides to help ensure Customer’s total satisfaction with the completed Order. To receive free revision the Company requires that the Customer provide the request within fourteen (14) days from the first completion date and within a period of thirty (30) days for dissertations.

Read more

Privacy policy

The Company is committed to protect the privacy of the Customer and it will never resell or share any of Customer’s personal information, including credit card data, with any third party. All the online transactions are processed through the secure and reliable online payment systems.

Read more

Fair-cooperation guarantee

By placing an order with us, you agree to the service we provide. We will endear to do all that it takes to deliver a comprehensive paper as per your requirements. We also count on your cooperation to ensure that we deliver on this mandate.

Read more

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency
Open chat
1
You can contact our live agent via WhatsApp! Via +1 817 953 0426

Feel free to ask questions, clarifications, or discounts available when placing an order.

Order your essay today and save 30% with the discount code STARS