MBA523 Problem Set 4

MBBA
523 Problem Set 4
Rodney
Biddle
Mbaa523_set4_biddle
1. Define the short-run and Long-run and provide an
aviation example?
2. In the short-run, Airbus manufactures
aircraft at its existing factories; however, labor and other inputs such as
those components purchased from suppliers (engines are one example) are
variable. Airbus has received a substantial number of new orders and will
increase its monthly aircraft production rate. Explain why the MPL
will decrease above some level of labor as more workers are added. How does
this decrease in MPL result in an increase in MC?

3.The table shows the marginal product of
labor for a manufacturing firm in the short-run. The cost of an additional
worker is $100 per day including benefits. The product sells for $2 per unit.
Compute the value of the marginal product of labor. How many workers will the
firm hire?

Labor (L)

MPL

VMPL

0

1

74

2

168

3

238

4

284

5

306

6

304

7

278

8

228

9

154

10

56

11

-66

4. Define economies of scale. Is there evidence of economies of scale
in the airline industry? (Hint: Consider Low-Cost-Carriers). In large
commercial aircraft manufacturing?