PRODUCTION AND COST

Assignment Overview

Before beginning this assignment, make sure you have gone carefully through all of the required readings for this module.  It is very important to carefully absorb both the general concepts as well as the numerical examples in the background readings.  For this assignment, you will have to answer some purely conceptual questions as well as some numerical problems.  For conceptual questions, make sure to thoroughly explain your answers and to cite specific readings from the required background materials to explain your answers.  For numerical problems, make sure to show all of your work and explain how you arrived at your answers (partial credit can be given if you get the final answer wrong but do some of the steps correctly). Note that you need to use Microsoft Excel to do the graphs for the numerical problems.

Case Assignment

Part A: Conceptual questions

1. Suppose you own a television factory and at your current level of output you have average total cost of $800 per television, average variable costs of $700 per television, and a marginal cost of $400.  If the price your buyers are willing to pay is $500, should you decrease or increase production?  Explain your reasoning, and make sure to cite at least one of the required readings in your answer.
2. You are the owner of a restaurant, and currently you have only one waiter.  While this keeps costs down, many of your customers go home because they are tired of waiting in line or waiting for their order.  You hire four more waiters and waitresses, and you are now able to serve a dramatically higher number of customers.  Seeing the huge productivity gains from hiring more staff, you then hire 20 more waiters and waitresses.  However, you are not able to serve any more customers than you were able to when your staff size was only four.  In fact, your restaurant has become overly crowded because there is not enough room in your restaurant for all of your staff.  You are confused as to why hiring four more staff members increased your productivity, but hiring 20 more did not.  What concept from the background readings best describes what happened in this case?  Explain your reasoning.

KINDLY FIND ATTACHED THE TABLE

Assignment Expectations

• Answer the assignment questions directly.
• Stay focused on the precise assignment questions. Do not go off on tangents or devote a lot of space to summarizing general background materials.
• For computational problems, make sure to show your work and explain your steps.