Ashford BUS 640 week 4 Assignment Exercises

Week Four Exercises

Chapter 8

2. At a management luncheon, two managers were overheard arguing about the following statement: “A manager should never hire another worker if the new person causes

diminishing returns.” Is this statement correct? If so, why? If not, explain why not.

Chapter 9

2. The Largo Publishing House uses 400 printers and 200 printing presses to produce books. A printer’s wage rate is $20, and the price of a printing press is $5,000. The last printer added 20 books to total output, while the last press added 1,000 books to total output. Is the publishing house making the optimal input choice? Why or why not? If not, how should the manager of Largo Publishing House adjust input usage?

4. The MorTex Company assembles garments entirely by hand even though a textile machine exists that can assemble garments faster than a human can. Workers cost $50 per day, and each additional laborer can produce 200 more units per day (i.e., marginal product is constant and equal to 200). Installation of the first textile machine on the assembly line will increase output by 1,800 units daily. Currently the firm assembles 5,400 units per day.

a. The financial analysis department at MorTex estimates that the price of a textile machine is $600 per day. Can management reduce the cost of assembling 5,400 units per day by purchasing a textile machine and using less labor? Why or why not?

b. The Textile Workers of America is planning to strike for higher wages.  Management predicts that if the strike is successful, the cost of labor will increase to $100 per day. If the strike is successful, how would this affect the decision in part a to purchase a textile machine? Explain.