1. Soccer balls. 40% of the world's soccer balls are made in Sialkot, Pakistan, by a...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
1. Soccer balls. 40% of the world's soccer balls are made in Sialkot, Pakistan, by a multitude of small manufacturers. Each individual firm is itself insignificant to global supply, and in many ways nearly identical. Soccer ball production involves a few principal costs: rent for factory space, equipment (die cutters, tables), artificial leather, and worker time. This is the annual total cost function for an individual firm in dollars: TC(q) = 62,500+ 0.0004.q You are going to analyze the market for soccer balls and the behavior of individual firms. a. First, solve for a firm's marginal cost and average cost functions. MC(q): AC(q): b. In the short run, the current prevailing wholesale market price is $12 per ball. How many balls will each firm produce, and how much will they earn in profits? Output: Profits: c. There are no barriers to entry for firms in this town, and so we would expect entry if firms are profitable. How much will each firm produce? What will be the long-run wholesale price for a soccer ball? What will each firm earn in profits? Output: Price: Profit: One of these small manufacturers, Football Ltd., discovers an innovation that allows them to make soccer balls cheaper. (The innovation is a way to cut pentagons closer together so they waste less material-read about it, and the managerial challenges it brought, in this recent article: the 02/) Football Ltd.'s new cost function is: TC(q) = 62,500+ 0.000324-q d. The wholesale price remains at the level found in (c). How much will Football Ltd produce, and what is its profit? Output: Profit: The following year, all other firms adopt this technology, and the resulting long-run equilibrium price for soccer balls falls to $9. Unfortunately, Rigid Ball Co. has been unable to convince their workers to adopt the innovation, and so still has the old cost function. To make matters worse, they were locked into a long-term lease on both their factory space and equipment, and so have to keep paying their fixed costs this year no matter what. e. How many soccer balls will Rigid decide to produce this year, if any? How many would you expect them to produce next year (after their long-term lease expires) if they still don't adopt the new cost-cutting manufacturing trick? Output this year: Output next year will be Greater than this year Same as this year Less than this year, but greater than zero Zero (the firm will exit). 1. Soccer balls. 40% of the world's soccer balls are made in Sialkot, Pakistan, by a multitude of small manufacturers. Each individual firm is itself insignificant to global supply, and in many ways nearly identical. Soccer ball production involves a few principal costs: rent for factory space, equipment (die cutters, tables), artificial leather, and worker time. This is the annual total cost function for an individual firm in dollars: TC(q) = 62,500+ 0.0004.q You are going to analyze the market for soccer balls and the behavior of individual firms. a. First, solve for a firm's marginal cost and average cost functions. MC(q): AC(q): b. In the short run, the current prevailing wholesale market price is $12 per ball. How many balls will each firm produce, and how much will they earn in profits? Output: Profits: c. There are no barriers to entry for firms in this town, and so we would expect entry if firms are profitable. How much will each firm produce? What will be the long-run wholesale price for a soccer ball? What will each firm earn in profits? Output: Price: Profit: One of these small manufacturers, Football Ltd., discovers an innovation that allows them to make soccer balls cheaper. (The innovation is a way to cut pentagons closer together so they waste less material-read about it, and the managerial challenges it brought, in this recent article: the 02/) Football Ltd.'s new cost function is: TC(q) = 62,500+ 0.000324-q d. The wholesale price remains at the level found in (c). How much will Football Ltd produce, and what is its profit? Output: Profit: The following year, all other firms adopt this technology, and the resulting long-run equilibrium price for soccer balls falls to $9. Unfortunately, Rigid Ball Co. has been unable to convince their workers to adopt the innovation, and so still has the old cost function. To make matters worse, they were locked into a long-term lease on both their factory space and equipment, and so have to keep paying their fixed costs this year no matter what. e. How many soccer balls will Rigid decide to produce this year, if any? How many would you expect them to produce next year (after their long-term lease expires) if they still don't adopt the new cost-cutting manufacturing trick? Output this year: Output next year will be Greater than this year Same as this year Less than this year, but greater than zero Zero (the firm will exit).
Expert Answer:
Answer rating: 100% (QA)
ANSWER a To find the marginal cost MC and average cost AC functions we differentiate the total cost TC function with respect to quantity q TCq 62500 0... View the full answer
Related Book For
Posted Date:
Students also viewed these economics questions
-
CANMNMM January of this year. (a) Each item will be held in a record. Describe all the data structures that must refer to these records to implement the required functionality. Describe all the...
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
Jontil Co. began the current period with a $14,000 balance in the Peter Jontil, Capital account. At the end of the period, the company's adjusted account balances include the following temporary...
-
Lola Corporation has two departments that produce two separate product lines. The company has been implementing total quality management over the past year. Revenue and costs of quality for that year...
-
What do trp attenuation and the lysine riboswitch have in common?
-
What factors are needed in determining the size of a sample?
-
The following information is from Harrelson Inc.s, financial statements. Sales (all credit) were $28.50 million for 2013. Sales to total assets1.90 times Total debt to total assets35% Current...
-
The argument section of the Trial Brief is the most important section. This is where you analyze the law that supports your client's position and describe why and how the law supports the position of...
-
Real option analysis can be used to alter the timing, scale, or other aspects of an investment in response to market conditions. Businesses face the dilemma of whether to invest in a project or...
-
Your company needs to decide whether to insulate a boiler to reduce heating costs. The following table provides the base case cost of the boiler versus the cost of an insulated boiler. The MARR rate...
-
Using real-world examples, discuss the possible relationship between economic growth and economic development.
-
Murchison Technologies, Inc. recently developed a patient-billing software system that it markets to physicians and dentists. Jim Archer and Janice Johnson founded the company in Austin, Texas five...
-
Interview at least ten people and ask the following questions: What are your auto liability insurance limits and deductibles? If you own your own home, do you have an all-risk or named perils...
-
Lee Chiew is borrowing \($170\),000 from Asia Bank USA to open Asian Health Foods in Virginia. She agrees to repay the loan at 10 percent compounded annually. Since she expects it to take a few years...
-
A series of 10 end-of-year deposits is made that begins with $7,000 at the end of year 1 and decreases at the rate of $300 per year with 10 percent interest. a. What amount could be withdrawn at t =...
-
Computing depreciation by three methods; identifying the cash-flow advantage of accelerated depreciation for tax purposes) On January 6, 20x6 K.P. Scott Co. paid 245,000 for a computer system. In...
-
Explain the buyers position in a typical negotiation for a business. Explain the sellers position. What tips would you offer a buyer about to begin negotiating the purchase of a business?
-
Global economic downturns can be catalysts for trade protectionism. As economies shrink, nations have incentive to protect their struggling producers by establishing barriers against imported goods....
-
The history of the U.S. automobile industry can be divided into distinct eras: the emergence of Ford Motor Company as a dominant producer in the early 1900s; the shift of dominance to General Motors...
-
Why is it that the pre-trade production points have a bearing on comparative costs under increasing-cost conditions but not under conditions of constant costs?
-
There are three general categories of capital budget scenarios: replacement, expansion, and investment in a NewCo. Describe the overall decision-making context for each. How do they draw on similar...
-
The overall process of creating a capital budget proposal has a lot of similarities to writing a business plan for a start-up company. Describe three aspects of the similarities between a budget...
-
In analysis, some focus seems to be on the need for NPV equations to be applied to projects that are mutually exclusive. But in practice we find that the lines are blurred in capital budgeting....
Study smarter with the SolutionInn App