1. Assume you must choose between two mutually exclusive alternatives: A or B. The explicit benefityou receive from alternative A, bª, is equal to $100. And, the explicit cost of choosing alternative A,c*, is $80. Also, the explicit benefit to choosing alternative B, b", is $120.What is the accounting return for choosing alternative A, r^?Given r and b", what is the explicit cost that you are willingness to pay (WTP) foralternative B, WTP"? Please include the formulas from class in your answer. How wouldWTPB change ifr^ increased by $5? Explain.yourUsing the original set of values for explicit costs and benefits, what would be your economicreturn to choosing alternativeHow does this relate to the concept of consumer surplus?if the price that you were charged was $95? Please interpret.

Given, Alternative A $80 Alternative B $120

Answered: Assume you must choose between two…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Problem 1. During your first month as an employee at Greenfield Industries (a large drill-bitmanufacturer), you are asked to evaluate alternatives for producing a newly designed drill bit on aturning machine. Your boss’ memorandum to you has practically no information about what thealternatives are and what criteria should be used. The same task was posed to a previous employeewho could not finish the analysis, but she has given you the following information: An old turningmachine valued at $350,000 exists (in the warehouse) that can be modified for the new drill bit.The in-house technicians have given an estimate of $40,000 to modify this machine, and they assureyou that they will have the machine ready before the projected start date (although they havenever done any modifications of this type). It is hoped that the old turning machine will be able tomeet production requirements at full capacity. An outside company, McDonald Inc., made themachine seven years ago and can easily do the…
Assume you must choose between two mutually exclusive alternatives: A or B. The explicit benefityou receive from alternative A, bA, is equal to $100. And, the explicit cost of choosing alternative A,cA, is $80. Also, the explicit benefit to choosing alternative B, bB, is $120.
a.A clothing manufacturer makes trousers, skirts and blouses. Each trouser requires 20 minutes of cutting time, 60 minutes of sewing time and 5 minutes of packagingtime. Each skirt requires 15 minutes of cutting time, 30 minutes of sewing time and 12 minutes of packaging time. Each blouse requires 10 minutes of cutting time, 24 minutes of sewing time and 6 minutes of packaging time.The amount of time available for cutting, sewing and packaging is 115 hours, 280 hours and 65 hours respectively. Using either the ??????? ?????? ?? ?????????'? ????, determine how many of each type of clothing should be made to use all available labour hours?
The manager of the donut shop tells you that hesells donuts for $1 each, and that if he were to makeadditional donuts, based on his current level ofoutput, it would cost him $0.80 per donut. Do yourecommend that the manager increase or decreasethe number of donuts he makes?
8. Discuss the impact of the following factors on the optimal method of procur- ing an input. d. Specialized investments. e. Unspecifiable events. f. Bargaining costs.
The table below shows the marginal benefit for various inputs. Assume that each level represents a $100 investment, and answer the following questions. (a) If you have an unlimited budget, how much would you spend on each input? Explain.(b) Now, assume you can spend a maximimum of $500. What would you spend on each inputnow? What order would you buy them in?(c) Finally, assume you can borrow as much as you want with an interest rate of 10%. How muchwill you borrow and how will you spend it if you have to pay back the loan within 1 year?
b.A clothing manufacturer makes trousers, skirts and blouses. Each trouser requires 20 minutes of cutting time, 60 minutes of sewing time and 5 minutes of packaging time. Each skirt requires 15 minutes of cutting time, 30 minutes of sewing time and 12 minutes of packaging time. Each blouse requires 10 minutes of cutting time, 24 minutes of sewing time and 6 minutes of packaging time. The amount of time available for cutting, sewing and packaging is 115 hours, 280 hours and 65 hours respectively. Using either the Inverse Method or the Cramer’s Rule, determine how many of each type of clothing should be made to use all available labor hours?
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2. A construction site uses two types of workers - skilled (S) and unskilled (U). They produce feet of new pavement (Q) per day according to the production function Q = 100S -5S² + 50U-5U² Skilled workers are paid $200 per day, while unskilled workers are paid $100 per day. The company paid $40,000 for equipment for the skilled workers. The company has a daily budget of $2,000 to hire skilled and unskilled workers. a. How many skilled and unskilled workers should be hired in order to produce the most pavement? Show your work/thought process: b. What is the profit-maximizing Q?
2. A construction site uses two types of workers - skilled (S) and unskilled (U). They produce feet of new pavement (Q) per day according to the production function Q = 100S -5S² + 50U-5U² Skilled workers are paid $200 per day, while unskilled workers are paid $100 per day. The company paid $40,000 for equipment for the skilled workers. The company has a daily budget of $2,000 to hire skilled and unskilled workers. a. How many skilled and unskilled workers should be hired in order to produce the most pavement?
Specify and explain the typical shapes of marginal-benefifit and marginal-cost curves. How are these curves used to determine the optimal allocation of resources to a particular product? If current output is such that marginal cost exceeds marginal benefifit, should more or fewer resources be allocated to this product? Explain.
The owner of Barb’s Burgers has suggested the firm should invest in more moderntechnology and created a list of potential changes she thinks may be helpful as aninvestment. She has asked you to analyze the four potential choices and comment onwhat this would change in terms of cost:1. Build kiosks in the dining area for people to place their orders without having tointeract with a cashier. The kiosks would need also need to be integrated into thepoint of sales system to track orders for the kitchen Question: Argue how each of these is likely to change the cost of the firm once implemented (i.e. are any of these a fixed cost or a variable cost). How this adjust theamount of labour and/or capital currently necessary for the firm? Would the technology be a general technology, labour-saving, or capital-saving?

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