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Managerial Economics Chapter 8 & 9 Applied Problems

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Week Four Assignment: Ch.8 & Ch.9
Keidra Conner
BUS 640 Managerial Economics
October 15, 2012

Ch.8 Applied Problem 2
2. At a management luncheon, two managers were overheard arguing about the following statement: “A manager should never hire another worker if the new person causes diminishing returns.” Is this statement correct? If so why? If not, explain why not. Yes, this statement is correct because in some cases hiring new workers can become negative and cause the marginal product to fall. The text states the managers beyond the point of diminishing returns but not to the point of negative marginal product (Thomas & Maurice, 2011, pp. 296-297).
Ch.9 Applied Problems 2 & 4
2. The largo Publishing House uses 400 printers and 200 printing presses to produce books. A printer’s wage rate is $20, and the price of a printing press is $5,000. The last printer added 20 books to total output, while the last press added 1,000 books to total output. Is the publishing house making the optimal input choice? Why or Why not? If not, how should the manager of Largo Publishing House adjust input usage? No, the publishing house is not making the optimal input choice because this is not the least-cost combination of inputs. The manager should hire another printer to maximize the output at a lesser cost. This will balance the amount of inputs for maximizing production of the given output.
4. The MorTex Company assembles garments entirely by hand even though a textile machine exists that can assemble garments faster than a human can. Workers cost $50 per day, and each additional laborer can produce 200 more units per day (i.e., marginal product is constant and equal to 200). Installation of the first textile machine on the assembly line will increase output by 1,800 units daily. Currently the firm assembles 5,400 units per day.
a. The financial analysis…...

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