Download Economics of strategy 6th edition solution manual by Besanko, Dranove, Schaefer, Shanley This is solutions manual for Economics of Strategy, 6th. Rick ross trilla download rar. Download Dahm Fundamentals of Chemical Engineering Thermodynamics 1st Edition solutions pdf, solution Chemical Engineering Thermodynamics. Join the NASDAQ Community today and get free, instant access to portfolios, stock ratings, real-time alerts, and more! Instructor’s Manual to accompany Economics of Strategy, Sixth Edition CHAPTER 2: Economies of Scale and Scope SUGGESTED ANSWERS TO END-OF-CHAPTER QUESTIONS 1. A firm produces two products, X and Y. The production technology displays the following costs, where C(i,j) represents the cost of producing i units of X and j units of Y: C(0,50) = 100 C(5,0) = 150 C(0,100) = 210 C(10,0) = 320 C(5,50) = 240 C(10,100) = 500 Does this production technology display economies of scale? This technology does not display economies of scale. The cost per unit of making 50 units of Y is $2, and the cost of making 100 units of Y is $2.10. Since the cost per unit does not decrease as the quantity of Y increases, this technology does not display economies of scale in the production of Y. The result is analogous in looking at the costs of making X, as well as looking at the costs of making X and Y together in greater quantities. This technology does display economies of scope in the production of X and Y. The cost of making 5 units of X is $150 and the cost of making 50 units of Y is $100. Made separately, the total cost of making 5 units of X and 50 units of Y is $250. The cost of making 5 units of X and 50 units of Y together is $240. 2. Economies of scale are usually associated with the spreading of fixed costs, such as when a manufacturer builds a factory. But the spreading of fixed costs is also important for economies of scale associated with marketing, R&D, and purchasing. Fixed costs are those costs that do not vary directly with output. Fixed costs must be expended in order to initiate production, but also for activities such as selling the output or developing improvements to the output. As the firm’s scale of operation increases in terms of volume of output and number of products produced, functions related to marketing, R&D, and purchasing are spread over more units—hence reducing the cost of each of these activities per unit sold. For example, once a firm invests in developing a new product, those R&D costs are fixed regardless of the scale of that product. 3. How does the globalization of the economy affect the division of labor? Can you give examples? As first identified by Adam Smith, “the division of labor is limited by the extent of the market.” In light of globalization, this means that specialization of productive activities will increase. The increased magnitude of the market due to globalization will increase the demand for more highly specialized labor. Examples of this higher demand for specialized labor would be the rise of high technology manufacturing jobs in countries like China where cell phones and computers are now assembled. Likewise the increase in specialized jobs such as accounting Instructor’s Manual to accompany Economics of Strategy, Sixth Edition and computer programming now exist in countries like India due to globalization. 4. A firm contemplating entering the market would need to invest $100 million to build a minimum efficient scale production plant (or about $10 million annually on an amortized basis). Such a plant could produce about 100 million pounds of cereal per year. What would be the average fixed costs of this plant if it ran at capacity? Each year, U.S. Breakfast cereal makers sell about 3 billion pounds of cereal. What would be the average fixed costs if the cereal maker captured a 2 percent market share? What would be the disadvantage if it achieved only a 1 percent share? If prior to entering the market, the firm contemplates achieving only a 1 percent share, is it doomed to such a large cost disparity? The average fixed cost is $10 million/100 million pounds or $0.10 per pound if the plant ran at capacity. A 2 percent market share would be.02 * 3 billion pounds or 60 million pounds per year. The average fixed cost would be $10 million/60 million pounds or $0.167 per pound. ![]() If the firm captured only 1 percent share, average fixed cost would be $10 million/30 million pounds or $0.333 per pound. The firm would be disadvantaged by $0.23 per pound relative to a plant that ran at capacity unless the size of the market increases over time. 5. You are the manager of the “New Products” division of a firm considering a group of investment projects for the upcoming fiscal year. 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