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MBAA 523 Problem Set 4




Question;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 VMPL0 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. 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 MC0 $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#56445 | Written in 18-Jul-2015

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