ECON 301 Business and Industrial Economics Assignment Total Marks 20 Section 1 Ques. 1 Ford Motor Company today is taking market share from rivals...

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ECON 301 Business and Industrial Economics

Assignment

Total Marks 20

Section 1

Ques. 1 Ford Motor Company today is taking market share from rivals and innovating new products with features consumers find desirable. But in the past, Ford famously lost market share to rivals when founder Henry Ford refused to engage in product differentiation, preferring instead the efficiency of mass production of a single product, saying that customers could get a Model T in any color, as long as it was black. What are the advantages and disadvantages of product differentiation? Can the market itself work out the right amount of product differentiation over time?

(3 marks)

Ques. 2 Are brands the same as companies? Does a crowded aisle at the store mean lots of competition?

(3 marks)

Ques. 3 Calculate average total cost, average fixed cost, average variable cost, and marginal cost of each output in the table. Sue’s Surfboards, hires workers at $500 a week and its total fixed cost is $1,000 a week. Plot these points and sketch the short-run average and marginal cost curves passing through them. (Plot the graph in excel and paste the same in word file.)

(3 marks)

Labor (workers per week)

Output (surfboards per week)

1

30

2

70

3

120

4

160

5

190

6

210

7

220

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Section 2

Ques. 4 Barry makes party ice. He employs workers to bag the ice who can produce the quantities of ice in an hour that are listed in the table. The market for ice is competitive and Barry can sell ice for 50 cents a bag. The labor market is competitive and the equilibrium wage rate of baggers is $10.00 an hour.

a. Calculate the marginal product of the workers.

b. Calculate the value of marginal product of the workers.

c. Find Barry’s demand for labor curve.

d. How much ice does Barry sell?

(4 marks)

Ques. 5 Back at Barry’s ice making plant described in Ques. 4, the price of party ice falls to 25cents a bag but baggers’ wages remain at $10.00 an hour.

a. What happens to Barry’s marginal product?

b. What happens to his value of marginal product?

c. What happens to his demand for labor curve?

d. What happens to the number of baggers that he employs?

(4 marks)

Ques. 6 Back at Barry’s party ice shop described in Ques. 4, baggers’ wages increase to $20 an hour, but the price of ice remains at 50 cents a bag.

a. What happens to his value of marginal product?

b. What happens to Barry’s demand for labor curve?

c. How many baggers does Barry employ?

(3 marks)

Number of workers

Quantity of ice (bags)

1

40

2

100

3

180

4

240

5

290

6

330

7

360

8

380