Assignment: Costs 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-1.1: Demonstrate college–level communication through the composition of original materials in Standard American English.
Before answering the following questions, review the Assignment Checklist. Then, in a separate Word document, write a 1–2 page expository research paper answer the following questions 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?
- Payments for rented manufacturing equipment.
- A firm’s use of a warehouse that it owns and could rent to another firm.
- Wages paid to the firm’s workers.
- The wages the firm’s owner could earn if he/she worked for another company.
- 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.
Marginal Product of Capital 4,000 Marginal Produce of Labor 100 Wage Rate $10 Rental Price of Pizza Ovens $500
- Is the owner of Pat’s Pizza Restaurant minimizing costs? Explain using the data in the table.
- 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?
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?
Costs and Cost Minimizing Output-MT455 paper