Econ Macro (book Only)
6th Edition
ISBN: 9781337408745
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 1, Problem 4P
To determine
The rationality to increase the delivery area by one mile and whether it would affect profitability.
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A. At XYZ Restaurant, which sells only pepperoni pizza, has the cost profile:
[Note that variable costs are per pizza]
Fixed Costs
Variable Costs
General
$1,500 Flour
$0.50
Labor
Rent
$3,000 Yeast
s0.05
Insurance
$200
Water
$0.01
Advertising $500 Cheese $3.00
$450 Pepperoni $2.00
Utitilies
Total
$5,650 Total
$5.56
Based on the total variable expenses per pizza, we now know that XYZ Restaurant must price its
pizzas at $5.56 ($0.50 + $0.05 + $0.01 + $3.00 + $2.00) or higher just to cover those costs.
We also know that if the pizzeria charges $10 for the finished product, then it receives $4.44 per
pizza to contribute to the fixed costs and ultimately the restaurants overall profits.
Question: How many pizzas does XYZ Restaurant need to sell at $10 each to cover
all those fixed monthly expenses?
QUESTION 1
Demand equation for a product is P = 100 – 0.01Q and the total
cost is TC = 50Q + 10000
-
(a). Write down the equation for the total revenue.
(b). Write down the equation for the profit.
(c). Find the value of Q when the firm breaks even.
(d). Determine the maximum profit and the value of output (Q)
at which profit is maximum.
Suppose we know that the price elasticity of demand for organic carrotsis −1.5. If a grocer decreases the price of organic carrots by 12%,what would we expect to happen to the quantity of organic carrotspurchased?(a) Decrease by 18%(b) Decrease by 6%(c) Increase by 6%(d) Increase by 8%(e) Increase by 18%
Chapter 1 Solutions
Econ Macro (book Only)
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