Unit 4 Assignment: Production and Cost Minimizing Output

In this assignment, you will analyze fixed and variable costs of a small business. You will also evaluate optimal quantity of output that minimizes costs and maximizes profits.

In this assignment, you will be assessed on the following Outcome:

GEL-1.02: Demonstrate college–level communication through the composition of original materials in Standard English.

Assignment:

Before answering the following questions, review the Checklist. Then, in a separate Word document, compose a 1–2-page paper consisting of a 450-500-word expository research essay answering the following questions, including computations, based on the rule for minimizing costs of production in regard to a small business plan to minimize costs in order to increase productivity and maximize profits.

  1. Pat’s Pizza Restaurant owner incurs various economic costs of production. Explain whether each of the following is an explicit cost or an implicit cost. Which of the two costs should Pat minimize to maximize his account profit?
      1. Payments for rented manufacturing equipment.
      2. A firm’s use of a warehouse that it owns and could rent to another firm.
      3. Wages paid to the firm’s workers.
      4. The wages the firm’s owner could earn if he/she worked for another company.
  1. Consider the following information in the table for Pat’s Pizza Restaurant and answer the questions below by using the cost minimization rule that takes into account the marginal product per dollar of inputs of production.

Item

Cost

Marginal Product of Capital

4,000

Marginal Product of Labor

100

Wage Rate

$10

Rental Price of Pizza Ovens

$500

 

    1. Is the owner of Pat’s Pizza Restaurant minimizing costs? Explain by computing marginal productivity per dollar using the data in the table.
    2. Should he rent more ovens and hire fewer workers or rent fewer ovens and hire more workers to increase productivity and lower costs of production? Explain.
  1. Your answer must consist of a 450–500-word expository research essay.

Consider Pat’s Pizza Restaurant’s production decision in both the short-run and long-run. Pat wants to improve the productivity of the firm in the long-run. Explain the types of input costs that might be fixed in the short-run and types of costs that may be variable in the long-run. Provide examples for fixed inputs and variable inputs, as well as fixed costs and variable costs for the restaurant in the short-run. What long-run economic decisions should Pat make to increase productivity, minimize costs, and maximize profit?

Checklist:

  • This assignment should be a separate Word document, and a 1–2-page paper consisting of a 450-500-word expository research essay, in addition to the title and reference pages.
  • It must be written in Standard English and demonstrate exceptional content, organization, style, and grammar and mechanics.
  • Respond to the questions in a thorough manner, providing specific examples where asked.
  • Your paper should provide a highly developed viewpoint and purpose.
  • Your writing should be well ordered, logical, and unified, as well as original and insightful.
  • A separate page at the end of your research paper should contain a list of references, in APA format. Use your textbook, the Library, and the internet for research.
  • Be sure to cite were appropriate and reference all sources. Your sources and content should follow proper APA format. Review the APA formats found in the Writing Resources accessed through the Academic Success Center within the Academic Tools area of the course.
  • Review the grading rubric to ensure all points have been captured in the paper.

Directions for Submitting your Assignment

Be sure to respond to all the questions using the critical elements listed in the assignment Checklist. Submit your assignment in a separate Word document by the end of Unit 4 to the Unit 4 Assignment Dropbox. Make sure to save a copy of your work and be sure to confirm that your file uploaded correctly.