Case Study of Aluminum In1994.Docx

Topics: Marginal cost, Supply and demand, Cost Pages: 2 (452 words) Published: October 11, 2012
(a) A list indicating which categories cost you included in your determination of marginal cost. Briefly explain why you included these and excluded the other categories.|

- “Marginal Cost” is aggregation of variable costs whose amount varies pertaining to production quantity. The lists of marginal cost are as follows. ◎ The lists of marginal cost
Item| Description|
TotalElectricity Cost| in the case of new plant of Alusaf, it amount of 16% of per ton aluminum price for every ton of produced aluminumthus electricity is bundled with production| Total Alumina Cost| alumina is the raw material of smelter, naturally variable cost| Other Raw Materials| the amount of coke& pitch, bath materials used in the process depends on the production| Consumables| purchased anodes and pot relining materials| Freight| freight cost depends on the production quantity|

◎ Other fixed cost
Item| Description|
Maintenance| fixed cost|
Labor| In manufacturing, labor cost is usually variable cost, however the material says that less production doesn't mean less labor thus smelting aluminum is not much dependent on labor amount| General andAdministrative| fixed cost|

Plant Powerand Fuel| if the power and fuel is not related to potlines, it can be fixed cost|

(b) A graph of your market supply curve.(You may want to “dress it up” by adding appropriate axis labels, etc.)| 1) Market Supply Curve is sum of individual firms's supply curve 2) Because firms are price-takers, their marginal revenue equals market price and they maximize their profit when marginal revenue equals marginal cost. Therefore, firms produce when marginal cost equals marginal revenue (=market price).

(c) An answer to the following questions:a. According to the supply curve you constructed, how much output wouldbe supplied by the aluminum industry at a price of $1,100 per ton. How does this compare to actual production in 1993b. According to the supply curve you...
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