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    Economics Managment Special

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    Ksesshumaru Demon
    The Oceanic Pacific fleet has decided to use pole-and-line fishing instead of gill netting to catch tuna in order to avoid harming endangered species. Experiments were conducted to determine the optimal number of fishermen. Diminishing returns begin at 8 fishermen. The stages of production are: 0-2 fishermen is stage 1, 2-8 is stage 2, and more than 8 is stage 3. At a tuna price of $3.50/lb, 7 fishermen maximize profits of $1750. At lower or higher prices, the optimal number changes to 6 or 8 fishermen respectively. Expanding labor beyond 9 fishermen is needed to meet the daily quota of 1000 lbs of tuna

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    Economics Managment Special

    Uploaded by

    Ksesshumaru Demon
    714 views3 pages
    The Oceanic Pacific fleet has decided to use pole-and-line fishing instead of gill netting to catch tuna in order to avoid harming endangered species. Experiments were conducted to determine the optimal number of fishermen. Diminishing returns begin at 8 fishermen. The stages of production are: 0-2 fishermen is stage 1, 2-8 is stage 2, and more than 8 is stage 3. At a tuna price of $3.50/lb, 7 fishermen maximize profits of $1750. At lower or higher prices, the optimal number changes to 6 or 8 fishermen respectively. Expanding labor beyond 9 fishermen is needed to meet the daily quota of 1000 lbs of tuna

    Original Description:

    This is a sample test for economic management

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    The Oceanic Pacific fleet has decided to use pole-and-line fishing instead of gill netting to catch tuna in order to avoid harming endangered species. Experiments were conducted to determine the optimal number of fishermen. Diminishing returns begin at 8 fishermen. The stages of production are: 0-2 fishermen is stage 1, 2-8 is stage 2, and more than 8 is stage 3. At a tuna price of $3.50/lb, 7 fishermen maximize profits of $1750. At lower or higher prices, the optimal number changes to 6 or 8 fishermen respectively. Expanding labor beyond 9 fishermen is needed to meet the daily quota of 1000 lbs of tuna

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    714 views3 pages

    Economics Managment Special

    Uploaded by

    Ksesshumaru Demon
    The Oceanic Pacific fleet has decided to use pole-and-line fishing instead of gill netting to catch tuna in order to avoid harming endangered species. Experiments were conducted to determine the optimal number of fishermen. Diminishing returns begin at 8 fishermen. The stages of production are: 0-2 fishermen is stage 1, 2-8 is stage 2, and more than 8 is stage 3. At a tuna price of $3.50/lb, 7 fishermen maximize profits of $1750. At lower or higher prices, the optimal number changes to 6 or 8 fishermen respectively. Expanding labor beyond 9 fishermen is needed to meet the daily quota of 1000 lbs of tuna

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    © All Rights Reserved
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    Download as doc, pdf, or txt
    of 3

    Economics and Management

    1.) The Oceanic Pacific fleet has just decided to use a pole-and-line method of
    fishing instead of gill netting to catch tuna. The latter method involves the
    use of miles of nets strung out across the ocean and therefore entraps
    other sea creatures besides tuna (e.g., porpoises, sea turtles). Concern for
    endangered species was one reason for this decision, but perhaps more
    important was the fact that the major tuna canneries in the United States
    will no longer accept tuna caught by gill netting.
    Oceanic Pacific decided to conduct a series of experiments to determine
    the amount of tuna that could be caught with different crew sizes. The
    results of these experiments follow.
    Number of Fishermen
    0
    1
    2
    3
    4
    5
    6
    7
    8
    9

    Daily Tuna Catch (LB)


    0
    50
    110
    300
    450
    590
    665
    700
    725
    710

    a. Determine the point at which diminishing returns occurs.


    The diminishing marginal returns sets in at L = 8

    b. Indicate the points that delineate the three stages of production.


    The first stage is between L = 0 to 2, the second stage is between L =
    2 to 8, and the third stage is beyond L = 8.

    c. Suppose the market price of tuna is $3.50/pound. How many fishermen


    should the company use if the daily wage rate is $100?
    The profit is maximized at hiring 7 fishermen, and the maximum profit
    is: $1750
    d. Suppose a glut in the market for tuna causes the price to fall to
    $2.75/pound. Suppose the price rose to $5.00/pound. What effect
    would this have on its hiring decision?
    At P = $2.75 per pound, the number of labourers that should be hired
    in order to maximize profits is: 6
    Number
    of
    Fisherm
    en
    0
    1
    2
    3
    4
    5
    6
    7
    8
    9

    Daily
    Tuna
    Catch
    (LB)
    0
    50
    110
    300
    450
    590
    665
    700
    725
    710

    Marginal
    Product of
    Labor
    ---------------50
    60
    190
    150
    140
    75
    35
    25
    -15

    Total Revenue
    at P = $3.50
    0
    175
    385
    1050
    1575
    2065
    2327.5
    2450
    2537.5
    2485

    Total Cost
    at W =
    $100
    0
    100
    200
    300
    400
    500
    600
    700
    800
    900

    Profit
    0
    75
    185
    750
    1175
    1565
    1727.5
    1750
    1737.5
    1585

    At P = $5.0 per pound, the number of labourers that should be hired in


    order to maximize profits is: 8
    Number
    of
    Fisherm
    en
    0
    1
    2
    3
    4
    5
    6
    7
    8
    9

    Daily Tuna
    Catch (LB)
    0
    50
    110
    300
    450
    590
    665
    700
    725
    710

    Mrginal
    Product of
    Labor
    ---------------50
    60
    190
    150
    140
    75
    35
    25
    -15

    Total
    Revenue
    at P =
    $5.00
    0
    250
    550
    1500
    2250
    2950
    3325
    3500
    3625
    3550

    Total Cost
    at W =
    $100
    0
    100
    200
    300
    400
    500
    600
    700
    800
    900

    Profit
    0
    150
    350
    1200
    1850
    2450
    2725
    2800
    2825
    2650

    e. Suppose the firm realizes that to keep up with the demand for tuna
    caught by the more humane pole-and-line method of fishing, each of its

    boats must catch at least 1,000 pounds of fish per day. Given the
    preceding data, what should it consider doing? Explain.
    In order to catch at least 1000 pounds of fish every day, the firm
    should decide to hire even more than 9 labourers. It should expand it
    labour schedule to include the costs and production for more than 9
    labourers.
    2.) Based on your knowledge of the definition of the various measures of
    short-run cost, complete the table.
    Q
    0
    1
    2
    3
    4
    5
    6

    TC
    120
    120
    384
    483
    568
    645
    720

    TFC
    120
    120
    120
    120
    120
    120
    120

    TVC
    0 x

    7
    8

    799
    888

    120
    120

    679
    768

    9
    10

    896
    1023

    120
    120

    776
    903

    264
    363
    448
    525
    600

    AC

    265
    192
    161
    142
    129
    120
    114.1
    43
    111
    99.55
    56
    102.3

    AFC
    x
    120
    60
    40
    30
    24
    20
    17.14
    29
    15
    13.33
    33
    12

    AVC
    x

    MC
    x

    0
    132
    121
    112
    105
    100

    0
    264
    99
    85
    77
    75

    97
    96

    79
    89

    97
    90.3

    8
    127

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