Operations in hilti company Essay Example for Free

Operations in hilti company EssayYou are the manager of a firm ex neuter product X in a competitive securities industry. You consider writing a market report on X. Due to some stinting changes, on that point is significant emergence in the reward of doers. Please write a report about the expected effects on the market equilibrium bell and equilibrium beat of product X. the following points help you organize your report 1. Indicate the effect of this event on offer and / or on pauperization. 2. psychoanalyse what will happen to market equilibrium price and equilibrium quantity in the short run. 3.If plights are expected to continue at high levels, analyse what will happen to market equilibrium price and equilibrium quantity in the long run. The competitive market is one of the type of economic market structure. In a competitive market the price is determined through the forces of choose and supply. The following essay the effects of increase on wages on product pri ce, quantity traded, and the supply and demand. The demand is the want or need of the person with the willingness to purchase the good at a particular price. The demand is negatively correlated to price.As the price increases the quantity demanded decreases. The supply is the desire and willingness of the supplier to sell the product at a particular price. The downward lean curve represents demand. Supply is positively correlated to price. As the price increases the quantity supplied increases. Hence, the positive sloping curve represents supply. In the competitive market the point where demand and supply meets is the equilibrium point, which shows the equilibrium price and quantity traded. This is illustrated in the following graph. The increase in wages, increases the costs of the product.This then will decrease the supply obstetrical delivery a shift in the supply curve. The shift of the supply curve occurs when any factor except price changes bringing an effect on supply. The increase in cost of production will reduce the supply at level of the price because now it has become more than costly to produce the supply. The supply curve will shift towards left. The following diagram shows that the supply curve S1 has shifted to S2. This has increased the market equilibrium price in the short run from P1 to P2. The quantity traded has decreased from Q1 to Q2. Long?Run market supply curve. The short? run market supply curve is just the horizontal summation of all the unmarried firms supply curves. The long? run market supply curve is found by examining the responsiveness of short? run market supply to a change in market demand. As the wages will increase, in the long run the price will reduce and the quantity traded will increase because there will be more entrants into the market and the competition will reduce the price of the product. However, the profit levels will also decreases due to the increase in the wages. question 2 Youve been hired by a firm to d etermine whether it should shut down its operation. The firm currently uses 70 workers to produce ccc units of output per day. The casual wage (per worker) is $40, and the price of the firms output is $20. The cost of other variable inputs is $500 per day. The firms fixed cost is $3000 per day. You know that the borderline cost of the go unit is $30. 1. Calculate the firms daily losses 2. Should the firm continue to operate at a loss? Carefully relieve your answer. positive daily losses are the following DescriptionCost / Revenue Total cost Total daily sales 300 x 20 6000 Daily total wages 70 x 40 2800 Variable inputs 500 Fixed costs 3000 Total Cost 6300 Daily losses 300 According to the profit maximization theory, each unit sold, marginal profit (M? ) equals marginal receipts (MR) minus marginal cost (MC). Then, if marginal tax revenue is greater than marginal cost at some level of output, marginal profit is positive and thus a greater quantity should be produced, and if marg inal revenue is less than marginal cost, marginal profit is negative and a lesser quantity should be produced.At the output level at which marginal revenue equals marginal cost, marginal profit is zero and this quantity is the one that maximizes profit. In this case, the marginal profit is negative as according in competitive market marginal revenue is equal to price hence, it is $20 and marginal cost being $30, this equals to -$10. The company should not operate at a loss. Question 3 Given the entropy of the last question (2), the owner of the firm suggested that losses can be reduced by firing some workers.If you found that the marginal product of the 70th worker was 4units of output per day, do you agree with the owner to reduce employment in order to reduce losses? Please explain carefully. The marginal product of labour is the change in the output compared to the change in the number of labour. Hence, the 70th labour is producing 4 units per day according to the data given in the question. The marginal product of labour is 4. In order to determine the demand of labour, the look upon of marginal product will be calculated.The economic tax of marginal product should equal to price of the product which is the marginal revenue (MR) with the marginal product of labour (MRP). As long as a workers value of marginal product exceeds the wage, the worker is hired. But because the marginal product is diminishing, eventually so many workers will have been hired that the value of the marginal product of an additional worker would be less than the wage. At this point the hiring will stop. A firm hires labour up to the point at which the value of marginal product equals the wage rate.If the value of marginal product of labour exceeds the wage rate, a firm can increase its profit by employing more workers. This can be summed in the following way Where TR = total revenue Q = quantity MR x MPL = (? TR/? Q) x (? Q/? L) = ? TR/? L Hence, in this case the value of marginal product is MR X MPL = 20 x 4 = 80 Wage rate = ? TR/? L = 40 The company should continue to hire more labour as the marginal product will diminish which will eventually bring the marginal revenue product of labour down until the wage rate is equal to the marginal revenue product of labour.