Identify a product produced by a specific company (Ford Explorer by Ford, PS4 by

Question

Identify a product produced by a specific company (Ford Explorer by Ford, PS4 by Sony, Kindle Fire by Amazon exct...). Describe the factors of production used to produce this product. Describe the types of costs involved in the production of this product. How would you determine whether the company is using the optimal mix of factors of production in the short run? How would you determine whether the company is using the optimal mix of factors of production in the long run? How would you determine whether the company is benefitting from economies of scale? How would you determine whether the company is benefitting from economies of scope?

Explanation / Answer

The product is coca cola soft drink manufactured by coca cola. The factors of production used are labour, capital and rawmaterials like carbonated water, phosphoric acid, sugar, caffeine etc. The costs involved are wages, purchase of machinery, rent, inventory costs, costs of purchasing rawmaterials, electricity, etc. We can determine whether factory is using optimal mix of factors in short run by comparing marginal cost with marginal revenue and also the price should be greater than Avc. In longrun besides the

comparing longrun marginal cost and marginal revenue we have to make sure that company atleast covers average costs of production.

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