Economics (2) - Copy

Economics (2) - Copy - 2. Referring to the table below,...

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2. Referring to the table below, hiring a driver costs $10. Each machine costs $100. Which method should he use and why? Show work. We will opt for the cheapest method—we find cost of each method first Cost1 = 20*10 + 10*100 = 1200 Cost 2 = 50*10 + 2*100 = 700 Cost3 = 100*10 = 1000 Cost 4 = 10*10 + 12*100 = 1300 Method 2 is cheapest and must be used 3. Enron will be an example of a dysfunctional company for many years to come. It was clearly a company riddled with fraud and excess and its conduct drove it into bankruptcy. The text argues that individual behavior was not at the core of Enron’s problems. What were the problems with this corporation from an organizational architecture point of view? I don’t have access to the textbook, so my answer is based on gathered knowledge. If this ans is not appropriate pl provide the relevant text books sections for a rewrite. The management made wrong decisions based on their overconfidence to operate projects successfully. Combined with accounting tricks, it tried to save itself from financial collapse, but was unsuccessful. The company also indulged in corporate extravaganza—buying airplanes and use of corporate chartered planes by its executives . See http://www.sjsu.edu/faculty/watkins/enron.htm for a detailed analysis. 4. For many corporations such as utility companies, a major portion of the cost of production is fixed in the short run. Should these very large fixed costs be ignored when the executives are making output and pricing decisions? Why? No, fixed costs must not be ignored in the long run. They can only be ignored in the short run, when variable costs are being covered by revenues . in the long run, fixed costs must be covered for a firm to operate. If they
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This note was uploaded on 04/01/2012 for the course ECON hui taught by Professor Uiuhuh during the Spring '12 term at York University.

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Economics (2) - Copy - 2. Referring to the table below,...

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