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Marginal Concepts in Managerial Economics - Case Study Example

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Name Institution Course Instructor Date Marginal Concepts Question 1: Most of Britain’s coalmines have closed down. There are still large reserves of coal available. Under what circumstances would you envisage businesses opening up coalmines and exploiting these resources?…
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Marginal Concepts in Managerial Economics
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Download file to see previous pages The best decision reached after analysis of the marginal concepts was the closing down of the mines (Chapman, Hopwood, and Shields, 1020). Logically, businesses can open up coalmines when situations in the market trends change. Change of these trends would include the rise of the prices of coal in the market. Rise of prices is a good motivation to open up coalmines because companies would make profits. This is because increase in prices of coal will give the company revenue that exceeds the production cost. As long as what they re getting after the sale of extracted coal exceeds the production cost, then the business is viable. Businesses interested in such a venture should consider the cost of production. More importantly, they should consider the marginal cost if at one point production is increased (Chapman, Hopwood, and Shields, 1022). Market demands and cost of increased production are the key determinants of whether a mine will increase production. After analysis of such concepts, businesses would consider opening up a coalmine if the demand of the product were high. Usually, a high demand would raise the prices. High prices of the product in the market would cater for the increased cost of production. In addition, it would be a viable venture for businesses to open up coalmines if they have an innovative technology that reduces the cost of production. ...
One can foresee opening up of coalmines in Britain at a time when businesses are able to combat the challenge of environmental pollution brought about by the mining process. Increased pollution at the site and its environs leads to respiratory diseases. Until a business can address such effectively, it would be futile to open up a coalmine. Addressing the issue of minimizing pollution will definitely lead to higher costs of production. Businesses should analyze the cost of managing pollution and its adverse effects. One can envisage opening of coalmines in places that are relatively safer. Risky places will reduce the utility obtained from mining. If analysis of the grounds near mines indicate a high level of safety, then it is viable to open up a mine. Operating in a safe working environment gives an individual much more satisfaction and is a condition that greatly affects mines. In addition, one can foresee opening up the reserves that are relatively easily accessible. Ease in accessibility of coal in a mine reduces the time and cost taken in its extraction. Analysis of the available reserves can tell whether the coal is easily accessible or needs more time and advanced machinery. It is critical that a business analyzes the cost of restoring the mine into a safe condition. In all the above cases, a business must analyze all the marginal concepts. According to Ryan, an understanding of these concepts will determine whether the venture is a viable one (225). Analysis of all the marginal aspects ranging from all types of costs incurred to the revenue gained is very critical. It is only until one of the above factors brings about a marginal change and economic calculations predict profits that businesses ...Download file to see next pagesRead More
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