Make components according to the cost function
Course:- Business Economics
Reference No.:- EM13891929

Assignment Help
Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
Assignment Help >> Business Economics

An outside firm can make components according to the cost function TC=1m + 10Q. Suppose it typically produces 10m units.

(a) What is this firm’s cost per unit? Suppose that your firm is able to buy components at this cost per unit. If you order 1m units from this outside firm, what is your total cost of components?

(b) Suppose you can produce the component yourself with the same total cost function; TC=1m + 10Q. How much do the 1m components cost?

(c) If the transaction cost of dealing with an independent firm is .8m and the internal cost of managing your own component division is .2m, is it more profitable to outsource?

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Business Economics) Materials
A machine that produces a certain piece must be turned off by the operator after each piece is completed. The machine "coasts" for 15 seconds after it is turned off, thus prev
Alice and Betsy are playing a game in which each can play either of two strategies, "leave" or "stay". If both play the strategy "leave", then each gets a payoff of $100. If b
Granny Butter and lugs Inc, pay an effective tax rate of 40% Granny is considering the purchase of a new churn for $28,000. this churn is a special handling device for food ma
Venture capitalists provide funds to finance new companies (start-ups), usually in return for a share of the firm’s initial profits (if any). Of course, venture capitalists lo
A newspaper recently lowered its price from $30 to $25. As it did, the number of newspaper sold increased from 20,000 to 25,000. What was the newspaper’s price elasticity of d
Changes in tastes reduce the demand for wheat substantially. What happens to price and output in the market for wheat? What happens to the price, output, and profits of the in
Consider a series of end-of-period CFs spanning 2043-2050, which increase by a fixed amount each period. The amount of the first CF in the series is $90 and the increment is $
In the long-run, if prices of all resources remain unchanged, when a firm doubles all resources the quantity of output more than doubles, the firm is experiences. The term fis