Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 16, Problem 8MC
To determine
Bargaining.
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(1) Patricia owns a cleaning business with Sarah. They both have other jobs and are trying to determine the number of hours to work at the cleaning business. The following payoff matrix shows their daily incomes depending on the number of hours they work at the cleaning business.
If Patricia chooses to work full time and Sarah works part time, what will each earn in daily income?
A-Patricia will earn $60; Sarah will earn $60. B-Patricia will earn $50; Sarah will earn $80.
C-Patricia will earn $80; Sarah will earn $50. D-Patricia will earn $55; Sarah will earn $55.
E-Indeterminate
(2) Company A and Company B are each telecommunications manufacturers. Both companies manufacture the same products, and they make their decisions based on the other's actions. Both companies are considering opening retail outlets to increase their profits. The payoff matrix shows the profits of the companies in millions of dollars if they choose to open retail outlets.
The government imposes a new $5…
Henry and Harper decide to open a concession stand next to a city park that has a number of sports fields. They each contribute $1,000 and rent a small food trailer and buy supplies. They anticipate being busy, so they hire James to help out and pay him weekly. The first summer, they make $12,000 and incur $6,000 in costs. How much profit is made and who will receive it?
Cooper and Rebecca run the only two lawncare companies in a small town. If they worked independently, they would each earn $3000. If they cooperated, they know they could raise the price of their lawncare services and service fewer lawns, but can each earn $4500. If one person raises prices and other does not, the person who raises prices will earn $1000 and the other will earn $6000. Draw a table representing their dilemm
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Managerial Economics: A Problem Solving Approach
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- Although Goldman Sachs paid Heather $110,000.00 per year, she was not satisfied with her job. She had loved going white-water rafting and skiing with her family in Utah since she was a little girl. So last year, she decided to open her own business: Family Adventures. During the summer, she takes families on different white-water trips, and in the winter, she leads clients on skiing trips. To start her business, Heather borrowed $100,000 from a bank and used $80,000.00 of her savings. Her savings earned 10% interest. At the end of the year, she wanted to know whether her new business venture was worthwhile. The table below lists her total revenue and itemized costs for Family Adventures. Annual Dollar Value $220,000.00 $140,000.00 Item Total revenue Employee wages Rent on her business office $25,000.00 Payments on bank loan Utility and gas expenses $10,000.00 $5.000.00arrow_forward4arrow_forwardPA no Page 5 8. Pat and Kerry are considering a partnership. With all Pat's resources, Pat can produce 50 X or 20 Y. With all of Kerry's resources, Kerry can produce 30 X or 30 Y. Assume the resources can be easily substituted to make either product. They are starting by using half of the resources to make each item. These relationships are shown in the following table. Use this information to answer the following questions: Kerry Product X (Xylophones) Product Y (Yams) 50 0 Pat 25 Pat make? 10 0 20 Pat make? 30 0 15 15 0 30 a. Who has an absolute advantage in producing X? Pat b. Who is a comparative advantage in producing Y? Partnership be gained from before they started trading? c. If Pat and Kerry decided to take all the gains from trade in X, how much X would 40 25 d. If Pat and Kerry decided to take all the gains from trade in X, how much X would Gain be gained from before they started trading? e. If Pat and Kerry decided to take all the gains from trade in Y, how much Y would f.…arrow_forward
- Reed, Isaiah, Nia, and Taylor are all lawyers. After several years of working for big firms, they decide to pool their resources and start their own law practice together. The four of them will make all their business decisions together and will share all of the profits and financial risk. Their new law firm is an example of which business organization? O Sole Proprietorship O Franchise O Partnership Corporationarrow_forwardQ-How does profit motive affect innovation and economic productivity? (Pages 43 – 50). Profit Motive Leads to Innovation and Increased Productivity According to Bruno Leone (1986), “In order to build and maintain a profitable concern, a businessman’s products would have to be needed, well-made, and competitively priced . Moreover, he would be creating jobs and helping to expand the general economy” (18). Profit motive promotes efficiency and productivity in an economy. The investor is constantly seeking new ways to effectively and efficiently provide goods and services to consumer, because, Mises (1986) stated, “Profit and loss are entirely determined by the success or failure of the entrepreneur to adjust production to the demand of the consumers” (40). The behavior of the consumer makes profits and losses occur, and this can result in a change of ownership from those who are inefficient to the efficient ones. Webley (1967) stated, “The successful firms are those that respond to the…arrow_forwardPicture attachedarrow_forward
- specialize in producing radios? Compasses? Problem 2 Gary and Diane must prepare a presentation for their economics class. As part of their presentation, they must do a series of calculations and prepare 50 PowerPoint slides. It would take Gary 10 hours to do the required calculation and 10 hours to prepare the slides. It would take Diane 12 hours to do the calculations and 20 hours to prepare the slides. How much time would it take the two to complete the project if they divide the calculations equally and the slides equally? a. How much time would it take the two to complete the project if they use comparative advantage and specialize in calculating or preparing slides? b. If Diane and Gary have the same opportunity cost of $5 per hour, is there a better solution than for each to specialize in calculating or preparing slides? Briefly discuss. C. 1arrow_forwardMercedes Benz seem to win every time with their social media campaigns. The one that stands out to me was back in 2013 when they created what I still believe to be one of the best Instagram marketing campaigns to date. Mercedes wanted to reach out to the younger audience so they hired five top Instagram photographers to each take the wheel of a new Mercedes CLA. Whoever got the most likes got to keep the car – so they all really worked at it! By the end of the campaign, Mercedes has received: 87,000,000 organic Instagram impressions 2,000,000 Instagram likes 150 new marketing assets (stunning photos) Q1. What lessons can you learn from this? Could you put your followers up for a challenge and make it into a competition or campaign? Q2. Can you do a competition that gets people trying out your product first? Q3. Think about your target audience. What is a prize they would value? Q4. Like Mercedes you could recruit bloggers/influencers via social media and get them blogging about your…arrow_forwardA young software engineer is selling the rights to a new video game he has developed. Two companies have offered him contracts. The first contract offers $10,000 at the end of each year for the next five years, and then $20,000 per year for the following 10 years. The second offers 10 payments, starting with $10,000 at the end of the first year,$13,000 at the end of the second, and so forth, increasing by $3,000 each year(i.e.the tenth payment will be $10,000+(9×$3,000). Assume the engineer uses an i of 9%. Which contract should he choose? First Company or Second Company.arrow_forward
- Info for the following two questions: Consider the sequential game below, with two players (1 and 2): 1 a b. (3,5) (4, 2) (5,1) (0, 0) e (0,0) (2, 4) The number next to the black nodes denote which player is picking the action. That is, player 1 starts; player 2 plays next unless player 1 picked c; and player 1 can play again if player 2 picked A. Question 13: What constitutes a pure strategy in this game? O The payoffs associated with the equilibrium outcome. For example, (2,4) describes a pure strategy. 2.arrow_forwardDon't copy and don't paste give wee new answerarrow_forwardFor the R & D game that Kimberly-Clark(Kleenex) and Procter & Gamble (Puffs) Play. Each firm has two strategies: Do R&D or do not R&D. If neither firm does R&D, Kimberly-Clark makes $30 million and Procter & Gamble makes $70 million. If both does R&D, Kimberly-Clark makes $5 million and Procter & Gamble makes $45 million. if only Procter & Gamble does R&D, it makes $85 million and Kimberly-Clark makes -$10 million, and if only Kimberly-Clark does R&D it makes $85 million and Procter & Gamble makes -$10 million. 7) Create the payoff matrix for this game?arrow_forward
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