Identify a product produced by a specific company Ford Explo

Identify a product produced by a specific company (Ford Explorer by Ford, PS4 by Sony, Kindle Fire by Amazon exct...). Describe the factors of production used to produce this product. Describe the types of costs involved in the production of this product. How would you determine whether the company is using the optimal mix of factors of production in the short run? How would you determine whether the company is using the optimal mix of factors of production in the long run? How would you determine whether the company is benefitting from economies of scale? How would you determine whether the company is benefitting from economies of scope?

Solution

Let us choose Ford Explorer. The factors of production used are labour, capital ( and rawmaterials like aluminium, steel, iron, pain, plastics etc). The costs involved are rent, electricity bill, wages to labour, interest to capital, costs of purchasing rawmaterials etc. We can determine whether the company is using optimal mix by calculating marginal cost average variable cost and marginal revenue. We have to equate MR to Mc. Further price should be greater than or equal to Avc. In the long run we will have to compare LMC, MR and Average cost. If they are equal the output is such that there is optimum product mix

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