Managerial Economics (MindTap Course List)
4th Edition
ISBN: 9781305259331
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 5, Problem 10MC
To determine
The correct statement about the sunk cost.
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(a) How would one estimate the full cost to an airline if one of its planes is held over for 24 hours in an airport for repair?
(b) A company has spent $10 million to develop a product for market. During the product’s first two years, the company’s profit was $6 million. In recent years, the market was flooded by rival products and now the company is reassessing its product. If it abandons the product, it can recover $2 million of its original investment by selling its production facility. If it continues to produce the product, its estimated revenues for successive two-year periods will be $5 million and $3 million and its costs will be $4 million and $2.5 million. (After four years the plant will have zero resale value.) What would be the company’s best course of action?
(c) Two decades ago, the global demand and supply curves for copper were: Qd = 15-10P and Qs = -3 + 14P, where Q is measured in millions of metric tons per year. Find the competitive price and quantity. Suppose that…
swered
Costs per Unit (dollars)
1000
900
800
700
600
500
400
300
200
100
0
4
Average total
cost
B
Marginal
cost
Output (units per day)
Average
variable cost
Average fixed cost
22
24
How many units of output should be produced per day if the price of the product
is
$600/unit? (provide an approximate answer in whole numbers)
A short production run with frequent adjustments to machines is considered a(n).
process of production.
Chapter 5 Solutions
Managerial Economics (MindTap Course List)
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- See the cost information in the table below. The marginal cost of the 6th unit is Quantity produced/day Total Cost Variable Cost 0 $100 0 1 $150 $50 2 $175 $75 3 $225 $125 4 $300 $200 5 $400 $300 6 $550 $450 Question 18 options: a) $30 b) $150 c) $100 d) $50arrow_forwardwhich quote best represents a person performing a cost-benfit analysis?arrow_forwardNo hand written solution and no imgarrow_forward
- Is the cost of the final product proportionate to its usefulness?arrow_forwardHow do you find the average cost, AC(y)AC(y)? Select one: a. MC(y)×VC(y)MC(y)×VC(y) b. AFC(y)+AVC(y)AFC(y)+AVC(y) c. AFC(y)−AVC(y)AFC(y)−AVC(y) d. ATC(y)AFC(y)arrow_forwardPlease solve with proper explanation and calculationarrow_forward
- What does the Cost basis generally include?arrow_forwardDrybar, a hair salon, faces a weekly demand for blowouts equal to qp = 1120 - 20P. The salon has weekly total cost of TC(q)=0.05q² + 20q + 500. (a) The minimum efficient scale (i.e., the quantity that achieves minimum average cost) is__. (b) The weekly marginal revenue for this salon is MR (c) This salon's profit maximizing level of output is__, price is__ (d) When the salon produces at the profit maximizing level, the consumer surplus is__, the producer surplus is__. (e) Suppose the salon can do first-degree price discrimination, consumer surplus is__and producer surplus is_-arrow_forwardWhich cost concept helps firms assess the additional cost of producing one more unit beyond the current level? a) Total cost b) Sunk cost c) Marginal cost d) Average costarrow_forward
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