Production Function Short Answer:
Based on the Carol's Cat Treats, Inc. scenario, graph the production function for the company and answer the following five questions:
List the coordinates of your graph:
Point 1: ____cartons , ____ workers
Point 2: ____cartons, ____ workers
Point 3: ____cartons, ____ workers
Point 4: ____cartons, ____ workers
1. At what point is marginal physical product negative? What does this mean?
2. What economic law is being displayed here?
3. Based on you graph, in your opinion, what is the optimal number of workers needed in order to get the maximum output? Why?
4. What capacity constraints are affecting physical production?
5. What can be changed in the short run? What can be changed in the long run?
Students do not need to turn in the graph, only the points for the graph. Follow the paper standards in developing your responses and submit your answers in a Word document to your instructor via e-mail. Be certain to develop thoughtful answers that apply concepts you learned in the chapter readings and the lecturettes.
Cost Short Answer:
Review the Carol's Cat Treats, Inc. scenario and the following information.
Scenario:
Carol Katzen opens up a small organic cat treat factory which has two large rooms, one for the kitchen that houses seven ovens and three industrial mixers, and one packaging room. She starts out with 20 workers and can produce a total of 50 cartons of cat treats. All 20 workers have their own work areas and are using only five ovens and two mixers. Carol is not fully utilizing the land and capital resources.
Cats really like the cat treats so their owners are buying more treats and sales are picking up, so Carol decides to hire 10 more workers - she now has 30 workers. Now, the workers are able to make a total of 70 cartons of cat treats a day. All of the seven ovens and three mixers are being used.
A cat magazine wrote an article on the treats so sales have increased even more, so Carol hires 10 more workers for a total of 40 workers. Carol's factory is already operating at full capacity, with all seven ovens and three mixers still being used. However, with 40 workers and such a limited number of ovens and mixers, some workers are now occasionally standing around idle. With all the confusion, productivity is reduced and now the workers are producing a total of 60 cartons of cat treats per day. Carol believes that if she manages the workers more carefully and diverts more of them to the packaging area, they will become productive again.
Sales are still going through the roof, so Carol decides to hire 10 more workers for a total of 50 workers. Carol really runs into trouble since two of the ovens break down. Some workers are fighting over the remaining five ovens, as trays of cat treats produced by the crew using the mixers really start to back up. The workers are now producing a total of only 55 cartons a day.
The rent and utilities for the factory is $7,000 per month.
The first 20 worker's are hired at $10/hr
The next 20 workers (40 total workers) are hired at $10/hr
When Carol hires 10 more workers to make a total of 50 workers, the 10 new workers make $10/hr and Carol raises the pay rate for the first 20 workers to $12/hr
After the article is written about the company and the treats, catnip growers see the article. Catnip is a key ingredients in the treats and so the growers raise the price of organic catnip from
$50 barrel to $75 a barrel.
Based on this information, answer the following two questions:
1. What are fixed costs and variable costs of this company?
2. Discuss the relationship between marginal physical product, average total costs and marginal costs using the specific information given about the company.
Follow the paper standards in developing your responses and submit your answers in a Word document to your instructor via e-mail. Be certain to develop thoughtful answers that apply concepts you learned in the chapter readings and the lecturettes.