Assignment:
You are the owner of a small bread factory and are thinking of lowering costs and expanding. Your small-business advisors suggested that you first review your operations and make some technological changes. Complete the following:
what atechnological changeis and how you can use it to lower your costs.
The next thing that your small business advisors asked you to do was to break down your costs and see what you can reduce.
in the table belowshowing the explicit fixed costs of the bread factory and the total amount of the costs.
you are not an expert yet on analyzing costs and optimal production levels, you decide to do a verysimple analysis of your short-run fixed and variable costs if you expand. Youdecide that your only fixed cost will bethe ovens and the variable costswill bethe workers.
|
Quantity of Workers
|
Quantity of Ovens
|
Quantity of Loaves of Bread Produced
|
Cost of Ovens
|
Cost of Workers Per Week
|
Total Cost
|
|
0
|
2
|
0
|
500
|
0
|
500
|
|
1
|
2
|
50
|
|
450
|
|
|
2
|
2
|
125
|
|
|
|
|
3
|
2
|
210
|
|
|
|
|
4
|
2
|
300
|
|
|
|
|
5
|
2
|
410
|
|
|
|
|
6
|
2
|
550
|
|
|
|
|
7
|
2
|
625
|
|
|
|
|
8
|
2
|
660
|
|
|
|
|
9
|
2
|
700
|
|
|
|
|
10
|
2
|
730
|
|
|
|
Instructions
1.Calculate the total cost and the average total cost, and add it to the table
2.Calculate the marginal product of labor, and add it to the table.
3.Calculate the average product of labor, and add it to the table.
4.Although there seems to be a great demand for your bread, why would productivity decline when you hire more labor in the short run?
5.What are your marginal costs?
6.At what point do your marginal costs and your total costs intersect?
7.Calculate your average total costs, your average fixed costs, and your average variable costs.
8.What happens to your average variable costs as your output goes up? Why is that?
9.How would expanding the business affect the economies of scale? When would you have constant return to scale and diseconomies of scale? Provide examples