Hello Show your work Please round all reliability answers to

Hello,

Show your work! (Please round all reliability answers to four decimal places, e.g., 0.1234 or 12.34%) • (5 points) If outputs decrease by 25% and inputs increase by 45%, what is the percentage change in productivity?

• (5 points) Suppose that a firm is considering opening a plant in China, and the current exchange rate is 5.25 Chinese Yuan (CNY) per dollar. Also, the Chinese wage rate is 6.3 CNY per hour. Suppose further that U.S. workers can produce 4 units per hour, while workers in China are expected to be able to produce 3 units per hour. After factoring in productivity differences, what is the “relative” wage rate (in dollars, rounded to the nearest penny) of operating in China?

• (15 points) Consider an expensive part with a reliability of 96.5%. If the part fails, it will cost the firm $2000. • What is the expected failure cost per part?

• On each part, a backup can be installed with a cost of $40. If the reliability for the backup is 50%, would the installation of this backup be a better option? Support your answer.

Thank you.

Solution

1.

Productivity=Output/Input

Lets, say the at the beginning the output as well as input were 100% and the result was 100% productivity.

Now, in the new condition the output decreased by 25%. Hence, the new output is (100-25)%=75%

Similarly, the input has increased by 45%. Hence, the new input is (100+45)%=145%

Therefore, New productivity is =75/145=0.517 or 0.52 or 52%.

The previous productivity was 100%.

Hence, the change in Productivity is (100-52)=48%