Omega Custom Cabinets Produces and Sells Custom Bathroom Vanities

question 1

Multiple Choice

Omega Custom Cabinets produces and sells custom bathroom vanities. Assume that labor is the only input that varies for the firm. The firm has determined that if it hires 10 workers, it can produce and sell 20 vanities per week. If it hires 11 workers, it can produce and sell 22 vanities per week. It sells each vanity for $800, and it pays each of its workers $1,000 per week. Which of the following is correct?

• A)For the 11th worker, the marginal profit is $600.
• B)For the 11th worker, the marginal revenue product is $2,000.
• C)The firm is maximizing its profit.
• D)If the firm is employing 11 workers, then its profit would increase if it cut back to 10 workers.

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Definitions:

Multi-business-unit Companies

Organizations that operate across different industries or markets, managing a portfolio of businesses as separate units under one overarching corporate umbrella.

Economies of Scope

Refers to efficiency gains derived from the diversification of products or services, allowing for shared resources and capabilities across offerings.

Intellectual Property

Legal rights given to individuals or organizations over their creations, inventions, and ideas, such as patents, copyrights, trademarks, and trade secrets.

Economy of Scope

Cost efficiencies derived from variety, rather than volume, where producing a wider range of products can lead to lower average costs.