THE UNIVERSITY OF BRITISH COLUMBIAManagerial Economics – Class 7 30-September-20101.Production Questions2.Introduction to Costs3.Opportunity Cost4.The Cost of Durable Capital Goods5.Sunk Cost6.Cost Curves in the Short Run and Long Run7.Cost Minimization in the Long Run8.Summary9.Feedback formsTHE UNIVERSITY OF BRITISH COLUMBIAClicker Question 1 (Production)Wage levels and capital costs vary from country to country. This should affect production techniques. Low wage countries should have labour-intensive production techniques. Which of the following facts about the Ford auto plant in Brazil can be explained using this fact. a.The extensive use of robots.b.Close in-plant integration of Ford with its suppliers.c.Ford’s ability to choose enthusiastic workers.d.The high level of assembly line flexibilitye.none of the above.
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THE UNIVERSITY OF BRITISH COLUMBIAClicker Question 2Consumer theory and production theory have a similar mathematical structure. Within this structure we can match consumer concepts with production concepts. Which of the following matches does NOT fit the pattern.a.Utility functions and production functions.b.Indifference curves and isoquants.c.The MRS and MRTS.d.Diminishing marginal utility and economies of scale.e.Consumption goods and productive inputs.THE UNIVERSITY OF BRITISH COLUMBIA2. Introduction to CostsFirms (like Ford) are in business to make profits. Part of making profits involves producing any particular quantity and quality of output at the lowest possible cost.In today’s class we will put together information about costs with information about production from last class to illustrate how this cost-minimization process can be understood.