SB is a giant conglomerate that produces and sells many different products all over the world.
1. For one of its products SB has a technology that uses 100 different inputs. Both input A and input B display diminishing marginal product. SB is currently using these inputs such that the marginal product of input A is 10 and the marginal product of input B is 20. The prices per unit of inputs A and B are both $10 per unit. Should the input mixture be altered? If yes, how and why? If no, why?
2. SB produces another product for which its customers have brand loyalty. That is, the demand curve for the SB product has a downward slope in the price set by SB. At the current price set by SB the demand is such that the marginal cost is 10 while the marginal revenue ( without any price discrimination) is $8. Should SB alter its price and production levels? If yes, why and how? If no, why?
3. SB produces one of its products at a single plant in Jakarta, it sells this product only in japan and Philippines, given the amount it produces and sells, it has no build up in inventory, the marginal cost of production is $10, the marginal revenue of sales in Japan is $20, while the marginal revenue from sales in the Philippines is $8, which of the following is true? Circle all that apply.
a. They should sell more in Japan and less in the Philippines.
b. They should sell more the Philippines and less in japan
c. They should sell more in both places
d. They necessarily should produce less in total
e. Cannot tell without more information
Need specific explanations, Thanks!