Marginal Analysis
Consider the production of purple heart CD boxes:
|
Price of CD box: $45.00 |
What is the profit maximizing number of workers? |
|
Price of labor: $11.00 / hour |
Assume that overhead is fixed at $10.00.
|
|
Price of materials: $35.00 / box |
EE = economic efficiency and TE = technological efficiency.
|
Fill in the blanks:
|
Number of Workers |
Number of boxes / hr. |
Cost of Labor / hr. |
Cost of Material |
Fixed Cost |
Total Cost |
Change in Total Cost |
|
1 |
1 |
? |
? |
? |
? |
? |
|
2 |
4 |
? |
? |
? |
? |
? |
|
3 |
6 |
? |
? |
? |
? |
? |
|
4 |
7 |
? |
? |
? |
? |
? |
|
5 |
7 |
? |
? |
? |
? |
? |
|
Number of Workers |
Number of boxes / hr. |
Total Revenue |
Change in Total Revenue |
|
1 |
1 |
? |
? |
|
2 |
4 |
? |
? |
|
3 |
6 |
? |
? |
|
4 |
7 |
? |
? |
|
5 |
7 |
? |
? |
|
Number of Workers |
Number of boxes / hr. |
EE of an Additional Unit of Labor |
|
1 |
1 |
? |
|
2 |
4 |
? |
|
3 |
6 |
? |
|
4 |
7 |
? |
|
5 |
7 |
? |
Consider the production of redwood Adirondack chairs:
Price of Adirondack chair: $75.00
Price of miter saw: $300 / saw
Price of materials: $60.00 / Adirondack chair
Assume that overhead is fixed at $250.
What is the profit maximizing number of miter saws?
|
Number of Workers |
Number of Chairs / hr. |
Cost of Saws |
Cost of Material |
Fixed Cost |
Total Cost |
Change in Total Cost |
|
1 |
40 |
? |
? |
? |
? |
? |
|
2 |
61 |
? |
? |
? |
? |
? |
|
3 |
79 |
? |
? |
? |
? |
? |
|
4 |
93 |
? |
? |
? |
? |
? |
|
5 |
103 |
? |
? |
? |
? |
? |
|
Number of Saws |
Number of Chairs / hr. |
Total Revenue |
Change in Total Revenue |
|
1 |
40 |
? |
? |
|
2 |
61 |
? |
? |
|
3 |
79 |
? |
? |
|
4 |
93 |
? |
? |
|
5 |
103 |
? |
? |
|
Number of Workers |
Number of Chairs / hr. |
EE of an Additional Unit of Labor |
|
1 |
40 |
? |
|
2 |
61 |
? |
|
3 |
79 |
? |
|
4 |
93 |
? |
|
5 |
103 |
? |