Text Questions
Dr. Seiler
October 14, 2012
Business 640

Text Questions
Chapter 8 2) This is not necessarily true. This scenario revolves around the principle of marginal product. Thomas & Maurice (2011) states that the marginal product is the change in quantity divided by the change in labor. Therefore the amount of product produced in relation to labor is the marginal product. However, the dilemma stated in this exercise declares that a manager should not hire an employee if it causes diminishing returns. According to Calvin (1961), the law of diminishing product states that “the marginal product of each input diminishes as its usage is expanded while all other inputs remain constant” (para 1). This means that even if productivity increases and more goods are produced, the marginal product may reduce (Thomas & Maurice, 2011). However, it is important to note that if the marginal product does diminish it may still be in the best interest of the manager and business to hire the new worker because it will increase the amount of product (Calvin, 1961). Diminishing marginal product is not the same as a negative marginal product. Negative marginal product occurs when the addition of a new employee decreases the amount of product produced. It is when this happens that a manager needs to consider other options. Hence, “managers do in fact employ variable inputs beyond the point of diminishing returns but not to the point of negative marginal product” (Thomas & Maurice, 2011, p. 296-297).

Chapter 9 2) They are not making the optimal input choice. The company can save$4,000 by having 50 printers print the same amount as one press. The cost of the total printers is $8,000, which produces 8,000 books. The total cost of the presses is $1,000,000, which produces 200,000 books. Therefore, the cost of each book that the printer produces is 1, while the cost per book for the presses is 5. The company should add more printers until the input is equal, MPL/w = MPK/r (Thomas & Maurice, 2011). 4) Page 366 a. Currently, the firm has hired 27 workers (5,400/200). This means the firm is spending $1,350 on wages. A textile machine costs $600 per day but produces 1,800 units daily. Therefore, if we subtract 1,800