Economics

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EC 561 PAGE 176 5-18
Sozonte Castro
Q| TC| TFC| TVC| MC| AC| AFC| AVC|
0| 420| 420| 0| | | | |
1| 500| 420| 80| 80| 500| 420| 80|
2| 560| 420| 140| 60| 285| 210| 70|
3| 610| 420| 190| 50| 203| 140| 63|
4| 670| 420| 250| 60| 169| 105| 63|
5| 745| 420| 325| 75| 149| 84| 65|
6| 840| 420| 420| 95| 140| 70| 70|
7| 960| 420| 540| 120| 137| 60| 77|
8| 1110| 420| 690| 150| 139| 53| 86|
9| 1295| 420| 875| 185| 144| 47| 97|

5-19
The Jones Company is using an optimal mix of labor and capital to produce its current output because the marginal product to price ratios is equal for all inputs. The ratio for both inputs is 2 units per dollar. Analyzing Managerial Decisions

Rich Manufacturing
1. Why do many firms use cost-plus pricing? Firms use cost-plus pricing because is a easy method to determines the price of a product or services.

2. What potential problems do you envision with cost-plus pricing? It could be a problem with the accuracy of cost-plus pricing when determining the cost

3. Should Gina content the price increase? I think Gina should not content the increase because profit increase in the long run by expanding productions

4. Is the increase more likely to be justified in the short run or the long run? The increase will be justified in the long run? It will justified in the long run because will be able to produce the product without looking for an alternatives, which at the long run the company will be better off.

5. How will a $3 increase in the price of machine parts affect Gina’s own production decisions? It will affect Gina’s decision because she will have to come up with an extra $150,000 to purchase the minimum order of 50,000.
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