Managerial Economics

Managerial Economics

1)The Imagine you are running Alcan in 1993 (and NOT Alcoa). Using the description

of the Aluminium industry provided in the case summary and the data from the

spread sheet (posted on Portal), how many tons you should produce that year (given

that year’s market price)? How much would you produce if instead the price had

dropped further to 950? Explain and provide clear support to your answers.

Smelter | Grand Baie | Beauharnois | Isle Maligne | Kinlochleven | Kambara A |

Country | Canada | Canada | Canada | UK | Japan |

Capacity | 180 | 48 | 73 | 11 | 20 |

Labor | 26973 | 11774 | 20025 | 3604 | 8596 |

Plant power and fuel | 1800 | 148 | 226 | 40 | 133 |

Maintenance | 9528 | 2541 | 3864 | 448 | 814 |

Gen & Admin | 11929 | 4035 | 4972 | 980 | 2697 |

| | | | | |

Average Total Cost | 870.74 | 1065.09 | 1114.55 | 1202.82 | 1358.49 |

Average Variable Cost | 591.69 | 679.71 | 716.10 | 741.78 | 746.47 |

| | | | | |

Market Price | Tons produced | | | | |

1100 | 180+48=228 | | | | |

950 | 180 | | | | |

2) Read the article “No Grain, Big Pain” (see Portal weblink). What reasons are

provided to explain the increase in the rice prices? Choose three of those reasons to

illustrate their effect on prices and quantities with a supply and demand diagram.

Answer : The reasons that explain the increase in rice prices are :

1) Major rice producers such as India, Vietnam curbed exports of rice to mitigate the problem of scarcity in their own countries.

2) Diversions of US corn crop to ethanol production, boosting the demand for other staples such as rice.

3) Hoarding by suppliers has artificially created a shortage of rice driving prices higher

D1

P1

P2

D2

S1

S2

3) Select a single answer to each of the 4 questions below and explain why it is the

correct answer

I. Engineers have just discovered a more efficient way to produce aluminium that

decreases the cost of...