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Reconnect Ltd Has Equipment That Is in High Demand, but Has

question 153

Multiple Choice

Reconnect Ltd has equipment that is in high demand, but has a limited amount of time available. The equipment can be used to produce a number of different products. The following data are available: $\begin{array} { | l | l | l | l | } \hline \text { Product } & \text { Unit Price } & \text { Unit Variable Cost } & \text { Units Per Hour } \\\hline \text { HX } & \$ 200 & \$ 100 & 8 \\\hline \text { CL } & \$ 300 & \$ 150 & 2 0 \\\hline \text { KB } & \$ 300 & \$ 125 & 15 \\\hline \text { JP } & \$ 100 & \$ 70 & 50 \\\hline\end{array}$ Which product should be emphasised first?

Definitions:

Bilateral Monopoly

A market in which there is a single seller (monopoly) and a single buyer (monopsony).

Wage Rate

The amount of money paid for a specific quantity of labor, often expressed per hour or year.

Complementary Inputs

Goods or services that are used together in production, where an increase in the use of one leads to an increase in the effectiveness of the other.

Substitution Effect

(1) A change in the quantity demanded of a consumer good that results from a change in its relative expensiveness caused by a change in the good’s own price. (2) The reduction in the quantity demanded of the second of a pair of substitute resources that occurs when the price of the first resource falls and causes firms that employ both resources to switch to using more of the first resource (whose price has fallen) and less of the second resource (whose price has remained the same).