You are & department manager in a large software firm, and you have an assignment to produce a customized database for a chient in the next wes Your boss asks you to find the least costly way to produce the database. In order to produce the database, you'll need to use computers and programmers. The production indifference curve on the following graph shows combinations of computers and programmers that you can use to create the database in a week, @ 0 9 : Production Indifference Curve 8 $600 Budget Line L g g T E a b Cost-min budget line B T 5 e = - = Z 4 - S Least Cost Combinaticn =X '_ % 3 2 1 0 0 1 2 3 4 5 B 7 8 9 10 LABOR (Number of programmers) 2 I "HANK YOU PLEASE ANSWER ALL THE QUESTIONS Which of the following are not combinations of programmers and computers that could produce the database within the time allotted? Check all th apply. O Two programmers and six computers [ Four programmers and three computers O Four programmers and two computers O Two programmers and four computers Each computer costs $300 per week, and each programmer costs $300 per week. Suppose your boss gives you a budget of $600 to spend on the project. {In other words, your boss wants the total cost of this project to equal 600.) On the previous graph, using the purple line (diamond symb plot the possibfe combinations of inputs you could affordthat is, plot your $600 budget line. What should you tell your boss about completing the database in a week with a budget of $6007 2 I can't complete the project by next week if that's all the money I can spend on it.\" ) "That's very generous, but we don't need such a large budget to complete the project.\" o "Sure, this won't be a problem.\" The least-cost input combination is W and w |, for a total cost of | | (Hint: Calculate the cos each of the blue points (circle symbols) on the production indifference curve on the previous graph.) On the previous graph, use the green line (triangle symbol} to plot the budget line showing the possible combinations of computers and orogrammers you could use for your cost-minimizing budget. For example, if you've found that the least expensive option for completing the database costs $1,000, then you should plot 2 31,000 budget line. Finally, use the black point (plus symbaol) to identify the least-cost combination of computers and programmers that can be used to produce the level of output represented by the blue production indifference curve. Douglas Fur is a small manufacturer of fake-fur boots in Houston. The following table shows the company's total cost of production at various production quantities. Fill in the remaining cells of the table. Total Total Fixed Total Variable Marginal (Variable) Average Variable Quantity Cost Cost Cost Cost Cost Average Cost (Dollars per (Pairs) (Dollars) (Dollars) (Dollars) (Dollars) (Dollars per pair) pair) 0 120 |:| - - 1 200 ll 2 240 ] ] ] L] 3 285 ll 4 340 ] | ] ] 5 425 | | | | 6 540 ] [ ] ] ] On the following graph, plot Douglas Fur's average cost (AC) curve using the green points (triangle symbal). Next, plot its average variable cost (AVC) curve using the purple points (diamond symbol). Finally, plot its marginal (variable) cost (MVC) curve using the orange points (square symbol). (Hint: For AC and AVC, plot the points on the integer: For example, the average cost of producing one pair of boots is $200, so you should start your average cost curve by placing a green point at (1, 200). For marginal (variable) cost, plot the points between the integers: For example, the marginal (variable) cost of increasing production from zero to one pair of boots is $80, so you should start your marginal (variable) cost curve by placing an orange square at (0.5, 80).) Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically. @ 200 - 176 + AC 150 + s . e E 25 1 4 5 AVC o e = 100 + == o Q % s + MVC (&} B0 + 25 + +GtGtGt 0 1 2 3 4 5 B QUANTITY OF OUTPUT (Pairs of boots) The following graph shows the short-run average total cost curves and the long-run average total cost curve for a publishing firm. The five marke guantities indicate points of tangency between each short-run average total cost { AC) curve and the long-run average total cost (LRAC) curve; example, {}; marks the point of tangency between AC; and LRAC. The orange point on AC; indicates the firm's current output level in the short run (Q2). AC LRA '_ = 3 o 1 i 1 i '_ a 1 1 i O 1 1 1 I I 1 1 1 I i 1 1 1 I f 1 1 1 I i | | 1 I I 1 1 1 1 i | | 1 I l 1 1 ] 1 J - @ 4 a q Q 1 2 3 4 5 OuTPUT In the long run, if the firm decides to keep output at its initial level, what will it likely do? In the long run, if the firm decides to keep output at its initial level, what will it likely do? O Shift to operate on AC? O Shift to operate on ACs O Shut down O Stay on AC, but decrease to the point touching LRAC Over which range of output levels do you find diseconomies of scale? O o to Q3 O o to Q O Greater than Q3 O Q2 to Q4 O o to Q1 the following graph shows the historical cost curve (black curve) and the analytical cost curves for both 1940 (purple curve) and the current year orange curve) in the public utilities industry in the fictitious country of Uswjia. Suppose that both in 1940 and currently, only one large firm supp tilities in Uswjia.The following graph shows the historical cost curve (black curve) and the analytical cost curves for both 1940 (purple curve) and the current ye: (orange curve) in the public utilities industry in the fictitious country of Uswjia. Suppose that both in 1940 and currently, only one large firm sup utilities in Uswijia. 100 50 &0 7% 1940 Analytical Cost Curve &0 50 Historical Cost Curve 40 Current Analyhical Cost Curve COST PER UNIT (Dollars) 30 Based only on the historical cost curve, you cannot say with certainty that a larger firm can currently supply utilities to Uswjia mare cheaply thar smaller firms because of economies of scale. O True O False Based on the shapes and positions of the analytical cost curves, in 1940 it was w per unit of cutput, for small firms to supp utilities to Uswiia than for one large firm to do so. Currently, it is , per unit of output, for small firms to supply utilities to L than for to one large firm to do so. Suppose a firm has two inputs: capital and labor. I he following table shows how much labor the firm needs to produce 200, 400, or 600 units of output if it has 1, 2, 3, or 4 units of capital: Labor Input (Hours) Quantity Produced With 1 Unit of Capital With 2 Units of Capital With 3 Units of Capital With 4 Units of Capital 200 60 30 10 5 400 90 50 35 25 600 100 65 45 30 On the following diagram, plot this firm's production indifference curves for 400 and 600 units of output. Specifically, use the purple points (diamor symbol) to plot the production indifference curve corresponding to 400 units of output; use the green points (triangle symbol) to plot the production indifference curve corresponding to 600 units of output. Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically. Points will snap to the quantities of labor. Plot your points in the order in which you would like them connected. 5 Production Indifference Curve (Q = 400) Production Indifference Curve (Q = 600)10 20 30 40 50 60 70 80 90 100 LABOR (Hours of labor) Suppose a firm has two inputs: capital and labor. The following table shows how much labor the firm needs to produce 200, 400, or 600 units of output if it has 1, 2, 3, or 4 units of capital: Labor Input (Hours) Quantity Produced With 1 Unit of Capital With 2 Units of Capital With 3 Units of Capital With 4 Units of Capital 200 60 30 10 5 400 90 50 35 25 600 100 65 45 30 On the following diagram, plot this firm's production indifference curves for 400 and 600 units of output. Specifically, use the purple points (diamor symbol) to plot the production indifference curve corresponding to 400 units of output; use the green points (triangle symbol) to plot the production indifference curve corresponding to 600 units of output. 5 Production Indifference Curve (Q = 400) 3 Production Indifference Curve (Q = 600) LAPI IAL (Units or capital) 2 10 20 30 40 80 90 100 LABOR (Hours of labor)sume that the price of labor is $25 per hour, and the price of capital is $250 per unit. Given these input prices, the least expensive way to produ 10 units of output is to use W of capital and "% hours of labor. ippose the firm's production indifference curve corresponding to an output of 200 units can be approximated by the smooth curve, labeled "Q=2 i the following graph. Using the green line (tnangle symbols), add the lowest budget line that the firm can attain at the given prices for capital and labor. Then use the black point (plus symbol) to identify the least-cost combination of labor and capital that can be used to produce an output level of 200. @ 5 . e - i Least Cost Combination S EA B o g 31 | Cost-min budget ine S 2 5 - 2 + = 3 l . Q=200 o+ : i - i - } - } - | o 10 20 30 4 50 6 T 80 90 100 LABOR (Hours of labor)