Author Question: Refer to Table 11-5. Suzette's Fancy Packaging subcontracts with Sunshineland Pecans to box dried ... (Read 200 times)

imowrer · **on:** Jun 29, 2018

Refer to Table 11-5. Suzette's Fancy Packaging subcontracts with Sunshineland Pecans to box dried fruit and nuts for Suzette's mail order business. Suzette rents space for her factory for 400 a week in a nearby strip mall.

She can hire temporary workers for 200 a week. Table 11-5 above shows her output and cost data. Use the table to answer questions a-e.
a. Complete the table.
b. In the last week of summer Suzette closes her business to go on a family vacation. What are her costs during that week?
c. In one week Suzette exactly breaks even. If her revenue for the week is 1,200, how many boxes of fruit and nuts did she produce?
d. Judging from the marginal product of labor data, would you say that Suzette had to settle for increasingly unproductive workers? Explain your answer.
e. Suzette has received an order for 1,500 boxes of nuts per week for the next 3 months. If she expects the trend in the marginal product of labor will continue in the same direction, what do you think she should do? Should she not commit until she can move to a larger space or should she just hire more workers? Explain your answer.

Question 2

Lou buys a Star Wars: The Force Awakens poster at a garage sale for 30 and resells it on eBay to Kyle for 60. Which of the following statements is true?

A) The transaction is economically inefficient.
B) The transaction has made Lou and Kyle better off.
C) The transaction has made Lou better off and Kyle worse off.
D) It is not possible for Kyle to enjoy any consumer surplus from this transaction.

josephsuarez · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

a.
Number of Workers Output (boxes) Marginal Product of Labor Office Rent Labor Cost Total Cost
0 0 -- 400 0 400
1 220 220 400 200 600
2 470 250 400 400 800
3 680 210 400 600 1,000
4 840 160 400 800 1,200
5 940 100 400 1,000 1,400
6 980 40 400 1,200 1,600

b. 400
c. 840 boxes
d. Diminishing marginal product of labor does not imply that the workers are unproductive. Rather, the marginal product declines because of the presence of a fixed factor, in this case the mall space. After hiring the 3rd worker the other workers have begun to get in each other's way.
e. She should not commit to meeting the order until she can move to a larger space and hire more workers.

Answer to Question 2

B