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Principles of Microeconomics
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You are the owner of a small bread factory and are thinking of lowering costs and expanding. Your small-business advisors suggested that you first review your operations and make some technological changes. Complete the following:
Explain what a technological change is and how you can use it to lower your costs.
The next thing that your small business advisors asked you to do was to break down your costs and see what you can reduce.
Develop a table that you believe shows the explicit fixed costs of the bread factory and the total amount of the costs.
Describe your variable costs.
Because you are not an expert yet on analyzing costs and optimal production levels, you decide to do a very simple analysis of your short-run fixed and variable costs if you expand. You decide that your only fixed cost will be the ovens and the variable costs will be the workers.
Quantity of Workers
Quantity of Ovens
Quantity of Loaves of Bread Produced
Cost of Ovens
Cost of Workers Per Week
0
2
0
500
0
1
2
50
450
2
2
125
3
2
210
4
2
300
5
2
410
6
2
550
7
2
625
8
2
660
9
2
700
10
2
730
Instructions
Calculate the total cost and the average total cost, and add it to the table
Calculate the marginal product of labor, and add it to the table.
Calculate the average product of labor, and add it to the table.
Although there seems to be a great demand for your bread, why would productivity decline when you hire more labor in the short run?
What are your marginal costs?
At what point do your marginal costs and your total costs intersect?
Calculate your average total costs, your average fixed costs, and your average variable costs.
What happens to your average variable costs as your output goes up? Why is that?
How would expanding the business affect the economies of scale? When would you have constant return to scale and diseconomies of scale? Provide examples.
Where is the optimal level of production and the optimal level of prices in the short run?
Please submit your assignment.
Principles of Microeconomics
Critical Inquiry Assessment for ECON 2321 Principles of Microeconomics Worth 5% of your Grade Critical Inquiry Goal: Demonstrate a knowledge base to ask more informed questions and learn more complex concepts. Search Google News for either “minimum wage,” “rent control,” or “externalities.” Read an article or two on one of those key words. Write 1-3 paragraphs then include the answers to one set of questions below (choose either Minimum Wage or Rent Control or externalities questions). You will need to use your textbook and/or your lecture notes to evaluate the statements in the article.
Externalities: 1)what examples of externalities does the article use? Briefly explain why they are positive/negative externalities. 2) According to your textbook and/or lecture notes, what are the consequences of positive/negative externalities? 3) How can we remedy market failure caused by externalities? Is the solution mentioned in the article a public policy or a private solution? 4) What is Coase Theorem? Use an actual or hypothetical example of how negotiation between interested parties can solve the problem of externality and lead to an efficient outcome.
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