Microeconomics
13th Edition
ISBN: 9781337617406
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 12.2, Problem 1ST
To determine
Explain one criticism of average cost pricing.
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What is the logic behind “cost plus mark up” pricing scheme? Please explain the greatest weakness of this pricing scheme?
why do we mean by full cost pricing and why is it important
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- How many shuts do you recommend selling per color per day? What then is your recommended dollar markup and markup percentage? What dollar margin and percentage margin is that?arrow_forwardThe Roadrunner farm, Wheeler’s one of competitors, reports that at their profit maximizing output, the price is below average variable cost. What would you advise?arrow_forwardDescribe the procedure of Gauging Product Cost and Price?arrow_forward
- Based on Zangwill (1992). Murray Manufacturing runs a day shift and a night shift. Regardless of the number of units produced, the only production cost during a shift is a setup cost. It costs $8000 to run the day shift and $4500 to run the night shift. Demand for the next two days is as follows: day 1, 2000; night 1, 3000; day 2, 2000; night 2, 3000. It costs $1 per unit to hold a unit in inventory for a shift. a. Determine a production schedule that minimizes the sum of setup and inventory costs. All demand must be met on time. (Note: Not all shifts have to be run.) b. After listening to a seminar on the virtues of the Japanese theory of production, Murray has cut the setup cost of its day shift to $1000 per shift and the setup cost of its night shift to $3500 per shift. Now determine a production schedule that minimizes the sum of setup and inventory costs. All demand must be met on time. Show that the decrease in setup costs has actually raised the average inventory level. Is this…arrow_forwardComplete the following table showing the demand for snow skiing lessons per day. Do this by filling in the values for (i), (ii), and (ii). Average Revenue (AR = TR/Q) Marginal Revenue (MR = ATRIAQ) Lessons Total Revenue (TR =PxQ) Price (P) $70 per Day (Q) $65 55 45 1 65 65 60 55 50 45 $65 2 3 120 60 (i) 200 225 55 4 50 35 5 (ii) 40 25 6. 40 240 15 7 35 245 35 5 8 30 240 30 (ii) (i) Total revenue for 3 lessons is $ (ii) Average revenue for 5 lessons is S (iii) Marginal revenue for the 8th lesson is $arrow_forwardhow markup pricing can be helpful to managers to make the firm earn the maximum amount of profit possible.arrow_forward
- Q3arrow_forwardWhen the price of a kettle increases from OMR 15 to OMR 20, the quantity demanded drops from 3550 units to 2500 units. Calculate the elasticity of demand and comment on the degree of elasticity. A hotel that produces 300 pizzas has a variable cost of OMR 100 and a fixed cost of OMR 150. Calculate the total cost, average total cost, average variable cost, and average fixed cost of the bakery.arrow_forwardWhat does mark-up pricing depend on? 1. Marginal cost 2. Average cost 3. Fixed cost 4. Total costarrow_forward
- Derive theoretically and graphically the supply curve of an industry.arrow_forwardThe following table contains different consumers' values for three software titles: PowerPoint, Excel, and Word. Suppose there are 100 consumers of each type. It costs Microsoft $0 to produce each piece of software. Consumer Types Administrative Assistants Marketing/Sales Accountants Price per each Profit on just that software PowerPoint Total profit on all software $76 $200 $25 A la carte pricing If Microsoft were to sell each of the software individually, what price should it set for each and what would its profits on each be? PowerPoint Excel $100 $100 $250 $ Word $200 $125 $25 Excel Word Bundled Pricing If Microsoft were to only sell the three products as a bundle, what price should they set for bundle and what would profits be? Bundled Price $ Total Profit S Mixed Pricing Suppose that Microsoft offered a bundle of all three for $375, but it also offers a price of $200 for each software separately. What is the new profit level for this pricing scheme?$ Is this mixed-pricing scheme…arrow_forwardHigh total revenue does not necessarily mean maximum profit. Explain this statementarrow_forward
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