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

Assignment Help
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
Would you expect deviations from the law of one price between the United States and Mexico to have risen or fallen over the past two decades? Explain your answer carefully, pr
The national restaurant association publishes an annual industry factbook that can be found at wwwrstaurant.org. Based on information in the latest report, does it appear that
What is the difference between a union shop and a closed shop? Which did the Taft-Hartley Act make illegal? How have more recent laws changed the role of unions?
Find the equal annual payment series that would be equivalent to the following increasing series of payments if the interest rate is 12% (a) compounded annually; (b) compounde
There are 2 firms to consider here from 2 different industries. A firm in Industry A has MC of production = $100 and they know from historical experience that their Lerner ind
Jaguar Machining needs to purchase a piece of machinery to be able to compete on a new contract with a first-tier automotive supplier. The machinery will cost $140,000 and the
Describe the roles of the President and Congress in the federal budget process. What are the problems with the federal budget process? Why haven't we had a budget for 5 years?
An economy has the following money demand function: (M/P)^d = .2Y/i^(1/2). Derive an expression for the velocity of money. What does velocity depend on? Explain why this depen