Econ question

Problem 1. Bike Production You are managing a firm that produces bicycles for the low-quality retail market. You are currently operating at full capacity for a single shift. Output is 10,000 bikes per year. Competition in this market is erce and prices are typically dictated by large retail stores you can thus think of your rm as a price taker. The price obtainable for your bikes is $50. Your rm's costs at the current level of output are as follows: Labor: $20.00 per bike Raw materials: $10.00 per bike Fixed costs: $250,000 (annualized) Shutting down the firm (and avoiding the xed costs) is not an option. You discuss the option of adding a second shift, to produce an extra 10,000 bikes per year. The production manager advises you that xed costs will not be affected by adding a second shift. The personnel department advises that the second shift would cost 20% more in terms of labor than the rst shift because of the need to pay a premium to these night shift workers. The VP of Procurement tells you that doubling the size of your raw material inputs would not change their per-bike price. a) What is the marginal cost per bike of the added output? b) What is the marginal revenue per bike for the added output? c) Would you, as general manager, expand production? Explain. [A quantitative answer is not required] (1) If shutting down (and avoiding the xed costs) becomes an option, would you do so? Give a response for both the smaller (Q=10,000) and larger production volumes (Q=20,000)