Production Cost- Managerial Economics

Part 1: Article Review

1. As a group, find at least four (4) academically reviewed articles on production cost. Write an annotated bibliography on the four (4) articles. 2. Based on the articles you reviewed, discuss the lessons you learned. Discuss how you would use the information in managerial decision-making.

Part 2: Application

Based on the materials presented in chapters 5 and 6 of the recommended textbook, develop a product idea.

1. Describe the product in detail.

2. Assume you have sufficient production capacity to manufacture the product. What are the costs associated with the manufacturing of this product? 3. Provide detailed cost data. You cost data should be segmented into fixed and variable costs.

4. Assume that the market demand for this product is 500 units and your company’s market share is 5 percent. Based on your cost data, calculate: A. Total cost B. Fixed cost per unit (average fixed cost) C. Variable cost per unit (average variable cost) D. Total cost per unit (average total cost) E. Marginal cost

5. Based on your calculations from #3 and #4, above, produce A. Graph that shows fixed cost, variable cost and total cost B. Graph that shows average fixed cost, average variable cost, and average fixed cost. C. Based on the two graphs, discuss your observations on the behavior of the costs.


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