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By studying, Will can produce a higher grade, on an upcoming economics exam. His production function depends on the number of hours he studies marginal analysis problems, A, and the number of hours he studies supply-and-demand problems, R. Specifically,

By studying, Will can produce a higher grade, on an upcoming economics exam. His production function...-1

His roommate David’s grade-production function is

By studying, Will can produce a higher grade, on an upcoming economics exam. His production function...-2.

a. What is Will’s marginal productivity of studying supply-and-demand problems? What is David’s? (Hint: See Appendix 6C.)

b. What is Will’s marginal rate of technical substitution between studying the two types of problems? What is David’s?

c. Is it possible that Will and David have different marginal productivity functions but the same marginal rate of technical substitution functions? Explain.

 
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Meredith’s firm sends her to a conference for managers and has paid her registration fee. Included in the registration fee is free admission to a class on how to price derivative securities such as options. She is considering attending, but her most attractive alternative opportunity is to attend a talk by Warren Buffett about his investment strategies, which is scheduled at the same time. Although she would be willing to pay $100 to hear his talk, the cost of a ticket is only $40. Given that there are no other costs involved in attending either event, what is Meredith’s opportunity cost of attending the derivatives talk?

 
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In February 2003, Circuit City Stores, Inc. replaced skilled sales representatives who earn up to $54,000 per year with relatively unskilled workers who earn $14 to $18 per hour (Carlos Tejada and Gary McWilliams, “New Recipe for Cost Savings: Replace Highly Paid Workers,” Wall Street Journal, June 11, 2003). Suppose that sales representatives sell one particular Sony high-definition TV model. Let q represent the number of TVs sold per hour, s the number of skilled sales reps per hour, and u the number of unskilled reps per hour. Working eight hours per day, each skilled worker sells six TVs per day, and each unskilled worker sells four. The wage rate of the skilled workers is ws = +26 and the wage rate of the unskilled workers is wu = +16 per hour.

a. Using a graph similar to Figure 6.3, show the isoquant for q=4 with both skilled and unskilled sales representatives. Are they substitutes?

b. Draw a representative isocost for c = $104 per hour.

c. Using an isocost-isoquant diagram, identify the cost-minimizing number of skilled and unskilled reps to sell q=4 TVs per hour.

In February 2003, Circuit City Stores, Inc. replaced skilled sales representatives who earn up to...

 
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Amidst a global health crisis, patients can be denoted into four separate categories.
On any given day in July, assume there are ten, ten, one, and two patients for clusters one, two, three, and four, respectively.
Each patient requires a total of six treatments, as displayed in Table One, from TI to TVI.
Table One displays processing times of each group’s treatment.
Each treatment is available eight hours a day.

Table I. Treatment times (in mins) per patient-group
Gr: TI TII TIII TIV TV TVI
1. 30 20 30 10 20 20
2. 20 10 10 20 30 20
3. 10 10 5 20 5 10
4. 5 20 10 5 5 5
1.) Which of the above is the bottleneck?
2.) What is the implied utilization and utilization of each treatment?
3.) How would the process capacity change if the available time of T5 is raised from eight hours to nine hours per day?

 
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