1、l. Is your school currently producing at capacity (i.e., teaching as many students as possible)? What considerations might inhibit full capacity utilization? LO: 1 AACSB: Analytic BT: CreateThere may be empty seats in your classroom that indicate unused capacity. Although it would be impractical to
2、offer classes around the clock, capacity utilization has increased as many schools have added early morning, night, and weekend classes to traditional Monday through Friday daytime classes. It is difficult to enroll the exact number of students to fill up each classroom for every course and even if
3、it were possible, some students would still drop out of specific classes or even the school. Due to the nature of our educational system, these students cannot be replaced during the middle of a semester. 2. What are the production costs of your economics class? What are the fixed costs? The variabl
4、e costs? What is the marginal cost of enrolling more students? 3 AACSB: AnalyzeThe fixed costs are the costs of providing the classroom and its equipment, some level of utilities, and the prorated share of the universitys infrastructure attributed to this class. The variable costs include the cost o
5、f the instructor, materials (chalk or markers, handouts), and some additional utilities. The marginal cost of enrolling one more student is nearly zero as long as there is a seat available in the classroom.3. Suppose you set up a lawn-mowing service and recruited friends to help you. Would the law o
6、f diminishing returns apply? Explain. 2 AACSB:In the short run, yes. As more and more friends helped, there would be capital constraints such as a limited number of lawn mowers, rakes, etc. Sharing the tools reduces each workers productivity. Also, they might tend to get in each others way and bicke
7、r and fuss. The result would be to decrease the output of each added worker over that of the previous worker. 4. What are the fixed costs of (a) a pizza shop, (b) an Internet Service Provider, (c) a corn farm? Who needs the highest sales volume to earn a profit?(a) The fixed costs of a pizza shop in
8、clude rent on the building (even if they own the building there is an opportunity cost), insurance, some minimal level of utilities (for example, for security and signage), ovens and other equipment, delivery cars, etc.(b) The fixed costs of an Internet Service Provider include rent on the building,
9、 the computer servers, the software necessary to provide access to the Internet, and a dedicated telephone line.(c) The fixed costs of a corn farm include the land, buildings, tractors, combines, and other equipment.Whichever business has the highest fixed costs needs the highest sales volume to ear
10、n a profit. 5. Owner-operators of small gas stations rarely pay themselves an hourly wage. Does this practice reduce the economic cost of dispensing gasoline? 5 AACSB:No, this practice does not reduce the economic cost of dispensing gasoline. It can change the accounting cost, but not the economic c
11、ost. Economists focus on opportunity costs; they include an allowance for how much the owner could have earned in an alternative job.6. In the News Wire on page 99, why did MPP fall to zero? What was the opportunity cost of those surplus workers? EvaluateAs more workers are hired in a given plant, M
12、PP declines. If too many are hired, MPP may even fall to zero, or less. In this case, the Headline tells us that there were surplus, i.e., too many, workers. The opportunity cost to the state of the surplus workers was what they could have done elsewhere had they not hired them. Or, this could inclu
13、de purchasing equipment so that the productivity of the work force would increase. 7. What role do expectations play in the production and investment decisions described in the News Wire on page 107?According to the News Wire, Nissan is expanding the production at its Barcelona plant by hiring an ad
14、ditional 1,000 workers. Nissan plans to create a new compact car and increase output of a pickup truck already being manufactured there. This production decision a focus on the short-run use of existing facilities is based on the expectation that consumers will be willing and able to purchase these
15、vehicles.Fiat, on the other hand, is looking for a whole new location for production. They are considering opening a plant to manufacture the brands sport-utility vehicles in Russia in an attempt to expand Jeeps global reach. This investment decision a focus on the long-run acquisition of productive facilities is an attempt to expand Jeeps global reach. This decision is based on the expectation (as with the Nissan example) that consumers will be willing
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