2. Year 11 Economics

3.  The government has imposed new health and saftey laws. The cost of safety training will be $30,000. You estimate this reduce stoppages and increase output by 5%  Do you 1. Introduce the training 2. Do nothing and risk a fine

4. 1. Option one  Add $30,000 to your staff training costs  Increase output by 500 units 2. Option two  An inspector arrives and fines you $10,000  Add $30,000 to training costs  Increase output by 500 units

5.  Your production manager wants to break up the task of making the skis into several smaller jobs and retrain the staff. Training costs will be $15,000 but output should increase by 20% and raw materials cost increases by $20,000  Do you 1. Introduce the change 2. Do nothing

6. 1. Option one  Increase output by 2000 units  Increase training costs by $15,000  Increase raw materials cost by $20,000 2. Option two  No changes

7.  You are considering installing sprinklers and improving fire safety. This will cost $12,000. You estimate the risk of fire is <2%  Do you 1. Install sprinklers 2. Do nothing

8. 1. Option one  Add $12,000 to other costs 2. Option two  There is no fire but your insurance company is not happy and increases your insurance premium by $10,000

9.  Due to the removal of import barriers the local market is flooded by cheap skis from overseas. You consider increasing advertising which will cost $60,000  Do you 1. Advertise 2. Not advertise

10. 1. Option one  Increase advertising costs by $60,000 2. Option two  The flood of cheap imports forces you to cut your price to $145

11.  Your factory staff are demanding a 10% pay rise or they will strike. If they do strike your annual output will fall by 10% from last year.  Do you 1. Accept the pay rise 2. Ignore the threat

12. 1. Option one  Increase wage costs by $15,000 2. Option two  The strike does not work and they return to work. However output falls by 1000 units

13.  Your molding machine is getting old and causing an estimated 5% reduction in output. A new machine will increase output by 200 units but will cost $25,000 a year to lease. It will also effect the cost of raw materials  Do you 1. Lease the machine 2. Keep using the old machine

14. 1. Option one  Increase output by 200 units  Increase lease costs machinery by $25,000  Increase raw materials cost by $4,000 2. Option two  Reduce output by 500  It keeps breaking down so increase other costs by $5,000

15.  You want to buy the warehouse next door so you can earn money from leasing it out. The lease income is $90,000 per year. You will need to borrow $500,000 and 8% interest  Do you 1. Buy the warehouse 2. Not buy the warehouse

16. 1. Option one  Increase other revenue by $90,000  Increase interest payments by $40,000 2. Option two  No changes

17.  You want to expand your business by taking over a rival ski maker who has closed. This will increase wages costs by $100,000, rent $20,000, freight by $10,000, machinery by $10,000, raw materials by $120,000, power by $2,000, staff training by $5,000 but will also increase sales by 10,000 and help you compete with the increasing imports of skis from overseas.  Do you 1. Expand 2. Not expand

18. 1. Option one  Rent up by $20,000 / Lease machinery up $10,000 / Wages up $100,000 / Raw materials up $120,000 / Freight up $10,000 / Staff training up $5,000 / Power up $5,000 / Output up 1,000  However increased supply from overseas pushes the price down to $130 2. Option two  Increase supply pushes the price down to $130