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##### MBAA 523 Problem Set 4 Define the short-run and long-run and provide an aviation example

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Question;MBAA;523;Problem Set 4 1.;Define;the short-run and long-run and provide an aviation example.;2. In the short-run, Airbus;manufactures aircraft at its existing factories, however, labor and other;inputs such as those components purchased from suppliers (engines are one;example) are variable. Airbus has received a substantial number of new orders;and will increase its monthly aircraft production rate. Explain why the MPL;will decrease above some level of labor as more workers are added. How does;this decrease in MPL result in an increase in MC?;3. The table shows the marginal;product of labor for a manufacturing firm in the short-run. The cost of an;additional worker is \$100 per day including benefits. The product sells for \$2;per unit. Compute the value of the marginal product of labor. How many workers;will the firm hire?;Labor;(L);MPL;VMPL;0;1;74;2;168;3;238;4;284;5;306;6;304;7;278;8;228;9;154;10;56;11;-66;4.;NEW;DELHI -- Each fall at harvest time, Leela Dhar Rajput used to hire 25 farm;hands to work from dawn to dusk every day for a week bringing in the rice crop;on his 20 acres of land in the central Indian state of Madhya Pradesh. This;year, he plans to use a combine harvester instead. With the machine and the;help of two or three men, he expects to finish the job in a single day. Indian;agriculture is belatedly engaged in a mechanical revolution, boosting;productivity in a sector that has long relied on cheap, surplus labor to tend;crops in the world's second most populous country. Job opportunities in;factories and services, plus the government's rural job-creation program;guaranteeing 100 days of employment a year on public-works projects, have;drained the pool of workers in villages. "I just can't find enough people;to do the hard work in the fields anymore," says Mr. Rajput. [Mukherji, B.;(2013, October 29). India's Farmers Mechanize. WSJ, B8.];Show and label the amount of capital (K);and labor (L) employed with the displayed isocost line and then insert a new;isocost reflecting a substantial increase in the price of labor. Mr. Rajput;intends to harvest the same quantity of rice as last year. Show and explain the;effect on the K and L employed.;K;L;5.;Complete;the table (the easiest method is to do the computation in MS Excel). Create a;line graph of AFC, AVC, ATC, and MC (in Excel, select the 4 columns, then;Insert/Line, and choose the first graph option). Explain the reason for the;shape of each curve. The completed table;and graph can be copied and pasted into this document. Hint: Be certain that your line graph looks similar;to those in Baye (your graph will not be as smooth as in Baye). If not, there;is likely an error in your computations.;Q;FC;VC;TC;AFC;AVC;ATC;MC;0;\$10,000;100;\$200;200;125;300;133.34;400;150;500;200;600;250;6.;Define;economies of scale. Is there evidence of economies of scale in the airline;industry? (Hint: Consider Low-Cost-Carriers). In large;commercial aircraft manufacturing?;="msonormal">

Paper#55412 | Written in 18-Jul-2015

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