Chapter 5
12. You were recently hired to replace the manager of the Roller Division at a major conveyormanufacturing firm, despite the manager’s strong external sales record. Roller manufacturing is
relatively simple, requiring only labor and a machine that cuts and crimps rollers. As you begin
reviewing the company’s production information, you learn that labor is paid $12 per hour and
the last worker hired produced 80 rollers per hour. The company rents roller cutters and crimping
machines for $15 per hour, and the marginal product of capital is 110 rollers per hour. What do
you think the previous manager could have done to keep his job?
14. Recently, the Boeing Commercial Airline Group (BCAG) recorded orders for more than
15,000 jetliners and delivered more than 13,000 airplanes. To maintain its output volume, this
Boeing division combines efforts of capital and more than 90,000 workers. Suppose the
European company, Airbus, enjoys a similar production technology and produces a similar
number of aircraft, but that labor costs (including fringe benefits) are higher in Europe than in
the United States. Would you expect workers at Airbus to have the same marginal product as
workers at Boeing? Explain carefully.
19. The A-1 Corporation supplies airplane manufacturers with preformed sheet metal panels that
are used on the exterior of aircraft. Manufacturing these panels requires only five sheet metal–
forming machines, which cost $500 each, and workers. These workers can be hired on an asneeded basis in the labor market at $9,000 each. Given the simplicity of the manufacturing
process, the preformed sheet metal panel market is highly competitive. Therefore, the market
price for one of A-1’s panels is $80. Based on the production data in the accompanying table,
how many workers should A-1 hire to maximize its profits?
Sheet Metal-Forming Machines
Workers
Number of Panels Produced
5
0
0
5
1
600
5
2
1,000
5
3
1,290
5
4
1,480
5
5
1,600
5
6
1,680
Chapter 6
8. Discuss the impact of the following factors on the optimal method of procuring an input.
a. Benefits from specialization.
b. Bureaucracy costs.
c. Opportunism on either side of the transaction.
d. Specialized investments.
e. Unspecifiable events.
f. Bargaining costs.
19. Recently, a 10-year contract between Boeing Commercial Airplane Group (BCAG) and
Thyssen Inc.—a distributor of raw aluminum—expired. The contract, valued at $300 million
when initially signed, stemmed from Boeing’s desire in the late 1990s to reduce production
bottlenecks resulting from supply shortages. Declines in the demand for commercial aircraft
during the past decade led some analysts to challenge BCAG’s wisdom in signing such a longterm contract. Do you share this view? Explain.
