1. If outputs decrease by 25%, and inputs increase by 30%, what is the percentage change in productivity?

2. Suppose that a firm is considering opening a plant on the moon, and the current exchange rate is 130 moon pieces (mp) per dollar. Also, the wage rate is 2132 mp per hour. Suppose further that U.S. workers can produce 30 units per hour, while workers on the moon are expected to be able to produce 16 units per hour (products periodically float away due to the low gravity level).

a. What is the "relative" wage rate (in dollars, rounded to the nearest penny) of operating on the moon, after taking productivity differences into account?

b. Suppose that the U.S. wage rate is $23.50 per hour. If the moon managers want to become the location of choice for production, and if they cannot lower their wage rate due to their mob-controlled labor unions, what does the labor productivity on the moon need to become (rounded to one decimal place)?

3. Consider an expensive part with a reliability of 92.8%. If the part fails, it will cost the firm $2800.

a. What is the expected failure cost per part?

b. On each part, a backup can be installed that costs $80. What is the minimum allowable reliability for the backup that would make installing it worthwhile? Support your answer.