Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 7, Problem 1.3P
To determine
What is the fixed factor and what alternative decisions are taken in the short run and long run.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
You are considering opening a small flower store. You anticipate that you will earn $100,000 each year in revenue. It will cost you $30,000 each year to rent the space necessary to run your business. Additionally, you will need to spend $10,000 each year on flower seeds, utilities, and other expenses necessary to operate your flower shop. You have just graduated from college with a degree in economics and have received an offer to work for a firm with a yearly salary of $70,000.
What is your anticipated economic profit of opening the flower shop?
You have just taken over the job of senior product manager for a line of Consumer Home Routers at Cisco. On your first day at work, your new boss walks into your office and informs you that your product line will be discontinued and replaced by a revolutionary new product line on October 1 of the same year. She also tells you that she wants you to raise prices on your existing product line by 20% in order to protect profitability during the transition. After a moment of reflection, you tell her that you need a day to gather some information and will respond to her at that time. You go to a number of sources including field sales VPs, market research, other product managers, and an external consulting firm, and ask them how responsive customers have been to changes in prices in the past. They tell you that a 10% increase in price always leads to a 5% decrease in sales volume. The next day you walk into your boss’s office.
What is your recommendation and what is your reasoning?
Imagine that you own one of several popular restaurants in your area. Due to the Covid Pandemic of 2020, all restaurants were forced to close down for two months. You are now allowed to reopen your restaurant to the public. During this time, labor costs were reduced however, overhead such as rent, electricity, etc. was still a large percentage of your total costs. You are facing a dilemma; you are short on funds.
What options should you consider? For example, should you raise menu prices to make up for the lost revenue? Should you lower menu prices to attract more customers? Is your customer volume elastic? If you raise prices and the customer volume falls will the increase in prices compensate for the loss of volume? If it does not, is there some way you can make up the revenue shortfall? If you lower menu prices and revenue falls is there some way you can increase your business revenue?
Explain your reasoning in terms of demand and elasticity.
Chapter 7 Solutions
Principles of Economics (12th Edition)
Knowledge Booster
Similar questions
- Suppose that you are a cattle rancher. You are deciding when to take your cattle to market to sell. You currently have a herd of 100 cattle. Each cow currently weighs 650 pounds and is gaining 50 pounds per month. Your feed costs are $40 per month per cow. Cattle prices are currently $8 per pound, but have been falling at the rate of $0.10 per month. If you are maximizing profits, how many months from now should you sell your cows?arrow_forwardYou've just been hired to run a division of a toy manufacturing company. Your boss informs you that the doll line in your division will be discontinued and replaced by a new and improved set of dolls later this year. He also tells you that he wants you to raise prices on the current doll line by 20% in order to protect profitability during the transition. You go to a number of sources including field sales reps, market research, and other division heads to ask them how responsive customers have been to changes in prices in the past. They tell you that a 10% increase in price always leads to a 5% decrease in sales volume at the firm. What is your recommendation to your boss and what is your reasoning?arrow_forwardMegan used to work at the local pizzeria for $17,000 per year but quit in order to start her own deli. Last year, she paid $4,000 rent each month, $4,500 for employee payroll each month, and $1,500 for supplies each month. She was planning on selling $2,500 worth of furniture but ended up bringing the furniture to her new deli. She had total revenue of $150,000. She asked an accountant and an economist to calculate her annual costs. Accountant says cost is $120,000, and economist says her cost is $139,500. Accountant says cost is $139,500, and economist says her cost is $120,000. Accountant says cost is $10,000, and economist says her cost is $29,500. Accountant says cost is $30,000, and economist says her cost is $10,500.arrow_forward
- Andie is considering leaving her job as attorney to pursue her passion by starting a dog grooming business. She currently takes home $6000 per month from her job. She pays $2000 per month to rent her house . if she were to start the dog grooming business, she would operate it out of the currently unused room at the back of her house and she would work at it fulltime. She would hire additional workers and pay them a total of$3000 per month , while spending $1000 per month on materials . she already has everything else she needs to start the business. What are the monthly economic costs of Andies potential dog grooming business.arrow_forwardBloomswood Hotel is situated in Forkland, a picturesque town in the mountain region of a country. Allen Grabos works as a gourmet chef at the hotel that caters mostly to tourists. In a conversation with his wife, Delia Grabos, Allen claims that he is underpaid. The hotel makes up to $500,000 per year but his annual salary is only around $28,000 a year. Delia, however, is of the opinion that since new hotels and inns are expected to open in Forkland, the salaries paid to hotel staff in the area should increase. (1) Which of the following, if true, will weaken Delia's argument? A. Due to an increase in the number of fatal accidents recently in Forkland, tourism in the area was adversely affected. B. Tourism revenues in Forkland have been increasing consistently for the past 5 years. C. Spring and summer are the peak tourist seasons in Forkland. D. Bloomswood sold one of its seaside resorts because tourism in that part of the country declined substantially. E. Bloomswood…arrow_forwardFollow the instructions. Typewritten for an upvote. No upvote for handwritten. PLEASE SKIP IF YOU HAVE ALREADY DONE THIS. Thank youarrow_forward
- A book that sounds just perfect for me, Kate Raworth’'s Doughnut Economics available on Amazon for $28.35 for the hardback and $15.04 for paperback. From the publisher’s perspective, the difference in the cost between each version of the book seems negligible; it may cost a little bit more to produce the hard cover, but certainly not twice as much. Hardback versions usually also get published a few months before paperback versions are published. How do you explain the different prices for essentially the same product, given that the cost to the publisher of providing each type of book is basically the same? Amazon also offers the Kindle digital e-book version for $11.87. The cost to Amazon to produce a new “copy” for the next consumer is virtually nothing; just the sending of some data to the customer’s device. Why is Amazon able to charge $11.87 when its cost is basically zero and the market for books is likely very competitive?arrow_forwardMarah is deciding whether or not to open a lemonade stand. She expects to sell 20 cups of lemonade for $1 per cup. She already made a sign that cost her $10 and will have $15 worth of additional costs for cups and lemonade mix if she decides to open the stand.arrow_forwardFirm X, a leading manufacturer of rubber tires in country A, caters to almost one-third of the domestic tire market. The country was hit by a recession last year that caused the national output growth to be negative. Simon Reeds, the CEO of firm X, feels that these fluctuations in the business environment are short-lived and expects the economy to recover very soon. In spite of the recession, Simon feels that the firm can actually invest in expanding its facilities as it has sufficient cash flows to continue its operation during the crisis period. The firm's marketing head, Sandra Jones, counters this by saying that the firm is already losing sales due to the recession and they should not increase costs further by making large-scale investments in the present climate. Which of the following, if true, would support the marketing head's claim? A. In the previous recession, a leading player in the hospitality sector had expanded its facilities but was unable…arrow_forward
- Firm X, a leading manufacturer of rubber tires in country A, caters to almost one-third of the domestic tire market. The country was hit by a recession last year that caused the national output growth to be negative. Simon Reeds, the CEO of firm X, feels that these fluctuations in the business environment are short-lived and expects the economy to recover very soon. In spite of the recession, Simon feels that the firm can actually invest in expanding its facilities as it has sufficient cash flows to continue its operation during the crisis period. The firm's marketing head, Sandra Jones, counters this by saying that the firm is already losing sales due to the recession and they should not increase costs further by making large-scale investments in the present climate. Which of the following, if true, would support the CEO's claim? A. The government recently announced a plan to offer incentives to buyers in the car and household appliances market. B.…arrow_forwardYou are planning to setup a new food truck, where you will be selling two types of sandwiches (1.Veg, 2.Chicken), each sold for $10. You've decided to staff the food truck with two employees who will be paid $15/hr each. The truck is open for 10 hours and both employees work the full shift. If the cost of the ingredients is $5 for each sandwich, how many Veg and Chicken sandwiches do they need to sell to avoid having a loss at the end of the month?arrow_forwardThe 8th graders are volunteering to make and sell organic pesticides, called Sweet4Bees, that will protect plants in local gardens without harming bees. The teens also plan to donate some of their product to local nursing homes to use in their gardens. Jade is so excited! She's already started a business log in her notebook, including a graph with a break-even point of 34 bottles sold. Suppose all Jade's notes become true. What is the club's overall profit per ounce of pesticide solution, when 26 bottles have been donated to the nursing homes? Round to the nearest cent. Sweet4Bees Business Log Sweet4Bees! Production Expenses: $1.45 (empty bottle), $0.05 (label), cost of ingredients (not sure right now, I'll call it $m) Taxes & Fees: none! Sales Selling Cost: $9.72/bottle Start-Up Expenses: $65.88 Expenses (high-speed mixer), $55 (pans), $26 (kitchenware) • Each bottle holds 12 oz of pesticide concentrate.* Directions for preparing solution: Mix 7 parts water to 1 part Sweet4Bees…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education