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Production, Costs and Profits - Essay Example

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Production, Costs And Profits [University] [Instructor Name] Q:1 The manager of the restaurant needs to consider several factors before deciding whether to purchase a new grill and French fry machine or to employ additional workers as suggested by its supervisor…
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Production, Costs and Profits
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Production, Costs and Profits

Download file to see previous pages... However, after a certain level of output the marginal revenue product of labor starts diminishing with each additional unit of labor/worker. This means with each additional worker, although the output is increasing, but at a decreasing rate, i.e., negative marginal returns. If this continues, there might come a point at which output actually starts falling with addition of variable factor labor. Under such, if the capital has reached its limit/full capacity, the manager of the restaurant should consider adding a new grill and French fry machine as adding workers will only add to the costs and will not solve the problem (Rittenberg & Tregarthen, 2009, Chapter 8). Q: 2: Marginal Decision Rule: The marginal decision rule says that the optimal point is the one in which the marginal utility of the next unit is equal to its marginal cost. This rule was applied in this case when deciding how much labor and capital to use. Initially, the industries operating in the maquiladoras were very labor incentive and only about 9% skilled labor was required to operate the existing setup. But then as the industry became more capital intensive, then more skilled labor were required and the percentage increased to 12% (Lucinda, 2001). Benefits: Although the capital and skilled labor were increasing in the Maquiladoras, but proper training was being given to them so that they can do the work properly and the marginal product rises instead of declining. Maquiladoras have benefitted US a lot. It has increased the business in the border areas. Moreover, it has created jobs for the people. Many manufacturers have also relocated in these areas. Due to this, the areas which were facing double digit unemployment have now generated enough jobs to reduce this unemployment. Moreover, the infrastructure has also developed in the areas where Maquiladoras are located in the US (Lucinda, 2001). Q.3 A generic drug company is one that produces drugs that are identical in essence (not literally) to branded drugs in dosage, strength, quality, intended use and performance characteristics. The chemical formulation is also similar and the name is often kept after the chemical name for marketing without much advertising. The generic drug industry, though still highly regulated, was given some relaxations under the Drug Competition and Patent Term Restoration Act of 1984 after which the industry boomed. The fact that the generic drug companies do not have to invest much on the research and development as compared to branded drug companies is the single most important factor for the success of these companies. For any drug company, R & D is a huge investment that it makes in order to keep coming up with new and better drugs for the healthcare industry and forms a significant part of the overall manufacturing and marketing of a particular drug. Thus, the companies that simply take the chemical formula of branded drugs without investing on R & D themselves save on their costs and are able to sell the drug at a significant discount from the price of an identical branded drug. Thus, a cheaper drug with similar properties will obviously sell more. Secondly, with generic drug companies allowed to make identical drugs, the patents are unable to protect branded drug comp ...Download file to see next pagesRead More
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