The criteria that firms apply to decide whether to produce a component part or purchase it in the market. Concept Introduction : Firms have to list criteria before deciding how to produce a component, based on objectives like profit-making, the cost involved, production limitations like resource availability, etc.

Question

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Answer 1

Question

Chapter 14, Problem 1P

To determine

The criteria that firms apply to decide whether to produce a component part or purchase it in the market.

Concept Introduction:

Firms have to list criteria before deciding how to produce a component, based on objectives like profit-making, the cost involved, production limitations like resource availability, etc.

Expert Solution & Answer

Explanation of Solution

Firms always have to decide between making a component or buying it outside. Their decision is always based on criteria like profit expectation and relevant cost of decision making.

Opportunity cost is the opportunity lost by choosing one alternative over the other. Therefore, such decision is based on total economic cost (opportunity cost + external outlays) between the two alternatives available. The one which is lower would be a choice for them. The relevant cost is different in making and buying as the variable and fixed cost differ. So, if the variable cost in contracting out is low, the firms would like to go for buying from the market. However, reliability on quality, timely delivery, and control over operations is questionable.

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2. A firm’s production function is given by:Q = 10KLThe unit capital and labour costs are 2 and 1 pounds respectively. The firm is contracted to produce2000 units.(a) Write out the optimisation problem of the firm. (b) Express this problem using a Lagrangian function. (c) Find values of K and L which fulfil the contract with minimal cost to the firm. (d) Calculate the total cost to the firm.

Answer 2

Question

Chapter 14, Problem 1P

To determine

The criteria that firms apply to decide whether to produce a component part or purchase it in the market.

Concept Introduction:

Firms have to list criteria before deciding how to produce a component, based on objectives like profit-making, the cost involved, production limitations like resource availability, etc.

Expert Solution & Answer

Explanation of Solution

Firms always have to decide between making a component or buying it outside. Their decision is always based on criteria like profit expectation and relevant cost of decision making.

Opportunity cost is the opportunity lost by choosing one alternative over the other. Therefore, such decision is based on total economic cost (opportunity cost + external outlays) between the two alternatives available. The one which is lower would be a choice for them. The relevant cost is different in making and buying as the variable and fixed cost differ. So, if the variable cost in contracting out is low, the firms would like to go for buying from the market. However, reliability on quality, timely delivery, and control over operations is questionable.

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Answer 3

Question

Chapter 14, Problem 1P

To determine

The criteria that firms apply to decide whether to produce a component part or purchase it in the market.

Concept Introduction:

Firms have to list criteria before deciding how to produce a component, based on objectives like profit-making, the cost involved, production limitations like resource availability, etc.

Expert Solution & Answer

Explanation of Solution

Firms always have to decide between making a component or buying it outside. Their decision is always based on criteria like profit expectation and relevant cost of decision making.

Opportunity cost is the opportunity lost by choosing one alternative over the other. Therefore, such decision is based on total economic cost (opportunity cost + external outlays) between the two alternatives available. The one which is lower would be a choice for them. The relevant cost is different in making and buying as the variable and fixed cost differ. So, if the variable cost in contracting out is low, the firms would like to go for buying from the market. However, reliability on quality, timely delivery, and control over operations is questionable.

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Answer 4

Question

Chapter 14, Problem 1P

To determine

The criteria that firms apply to decide whether to produce a component part or purchase it in the market.

Concept Introduction:

Firms have to list criteria before deciding how to produce a component, based on objectives like profit-making, the cost involved, production limitations like resource availability, etc.

Expert Solution & Answer

Explanation of Solution

Firms always have to decide between making a component or buying it outside. Their decision is always based on criteria like profit expectation and relevant cost of decision making.

Opportunity cost is the opportunity lost by choosing one alternative over the other. Therefore, such decision is based on total economic cost (opportunity cost + external outlays) between the two alternatives available. The one which is lower would be a choice for them. The relevant cost is different in making and buying as the variable and fixed cost differ. So, if the variable cost in contracting out is low, the firms would like to go for buying from the market. However, reliability on quality, timely delivery, and control over operations is questionable.

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Answer 5

Chapter 14, Problem 1P

To determine

The criteria that firms apply to decide whether to produce a component part or purchase it in the market.

Concept Introduction:

Firms have to list criteria before deciding how to produce a component, based on objectives like profit-making, the cost involved, production limitations like resource availability, etc.

Expert Solution & Answer

Explanation of Solution

Firms always have to decide between making a component or buying it outside. Their decision is always based on criteria like profit expectation and relevant cost of decision making.

Opportunity cost is the opportunity lost by choosing one alternative over the other. Therefore, such decision is based on total economic cost (opportunity cost + external outlays) between the two alternatives available. The one which is lower would be a choice for them. The relevant cost is different in making and buying as the variable and fixed cost differ. So, if the variable cost in contracting out is low, the firms would like to go for buying from the market. However, reliability on quality, timely delivery, and control over operations is questionable.

Answer 6

Chapter 14, Problem 1P

To determine

The criteria that firms apply to decide whether to produce a component part or purchase it in the market.

Concept Introduction:

Firms have to list criteria before deciding how to produce a component, based on objectives like profit-making, the cost involved, production limitations like resource availability, etc.

Expert Solution & Answer

Explanation of Solution

Firms always have to decide between making a component or buying it outside. Their decision is always based on criteria like profit expectation and relevant cost of decision making.

Opportunity cost is the opportunity lost by choosing one alternative over the other. Therefore, such decision is based on total economic cost (opportunity cost + external outlays) between the two alternatives available. The one which is lower would be a choice for them. The relevant cost is different in making and buying as the variable and fixed cost differ. So, if the variable cost in contracting out is low, the firms would like to go for buying from the market. However, reliability on quality, timely delivery, and control over operations is questionable.

Answer 7

Chapter 14, Problem 1P

To determine

The criteria that firms apply to decide whether to produce a component part or purchase it in the market.

Concept Introduction:

Firms have to list criteria before deciding how to produce a component, based on objectives like profit-making, the cost involved, production limitations like resource availability, etc.

Answer 8

Expert Solution & Answer

Explanation of Solution

Firms always have to decide between making a component or buying it outside. Their decision is always based on criteria like profit expectation and relevant cost of decision making.

Opportunity cost is the opportunity lost by choosing one alternative over the other. Therefore, such decision is based on total economic cost (opportunity cost + external outlays) between the two alternatives available. The one which is lower would be a choice for them. The relevant cost is different in making and buying as the variable and fixed cost differ. So, if the variable cost in contracting out is low, the firms would like to go for buying from the market. However, reliability on quality, timely delivery, and control over operations is questionable.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Ch. 14 - Prob. 1P Ch. 14 - Prob. 2P Ch. 14 - Prob. 3P Ch. 14 - (Search with imperfect Information) The following...Ch. 14 - Prob. 5P Ch. 14 - Prob. 6P Ch. 14 - Prob. 7P Ch. 14 - Prob. 8P Ch. 14 - Prob. 9P Ch. 14 - Prob. 10P

Explanation of Solution

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