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To Whom It May Concern:
I am writing to you in regard to the proposal to incorporate tin flasks into our production. This is unrealistic for Dalcar Incorporated for many reasons, and I plead for you to read this letter and begin to see economic reason. It is important for our company to use economic thinking to make this decision for the betterment of our corporation, while considering economic
components such as scarcity, opportunity cost, and efficiency. We also have to think at the margin and review production possibility issues.
The idea that we could produce 10 million tin flasks along with the 10 million tin stars we are currently producing is a little redundant due to the scarcity of tin ore. We must decide the best way to utilize our existing resources. We are located at the only site of tin ore in the world and are already operating at full capacity. With the limited availability of this resource and the limited space of our operation, doubling our production is impossible. Another flaw in this proposal is employment. We are employing all available labor in our country therefore it will prove difficult to double production without increased employment or increased wages. This brings about the argument of opportunity cost, which is the highest valued alternative that we are
sacrificing by making this decision. The opportunity cost would be the time and money spent on creating tin stars that we know is bringing us profit versus tin flasks that will possibly hurt us more than help us. The opportunity cost from an employee’s perspective would be working overtime and having increased wages while sacrificing their time spent at home with their families or doing pleasurable activities. We would be overworking our employees because there are no more available labor workers in Alveria.
Using marginal thinking, you can weigh the costs and benefits of this decision. The marginal cost of production of tin flasks (equipment and materials), increased wages to
employees, and addition of more space to our operation, outweighs the potential benefit of increased profit. There is no way to know for certain that the tin flasks will bring enough profit to cover the expenses, not to mention the setbacks while undergoing construction. We would have a decrease in production while expanding our corporation due to construction taking place and the temporary further limitation of space. I ask you to ponder the efficiency of this decision. What will provide the best use of resources in the most cost-effective way while producing products that society wants? I believe this question is simple while looking at the bigger picture and is easily answered by keeping to our production of tin stars. What would it look like if we considered producing tin flasks? The most cost-effective way to do this would be to sacrifice some of our production of tin stars. By using a conceptual tool called the production possibilities curve, we can see the effects of adding tin flasks to our production. We can use this curve to see the maximum amount of tin flasks and tin stars we can produce with our available resources. These resources would include tin ore, labor workers, and available space. Instead of losing money on increasing wages and expanding our space, we would have to sacrifice some of our space and employees designated to the production of tin stars. This means that the proposal of doubling production is impossible if expected to use full and efficient use of these resources, because the economy is unable to afford the combination of 10 million tin stars and 10 million tin flasks with the number of resources available. I thank you for your time and patience and urge you to consider these economic components before accepting the proposal. Using economics as a way of thinking will benefit our corporation by helping us to better navigate these types of decisions in the future.
-Dalcar Incorporated Economic Consultant
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