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
expand_more
expand_more
format_list_bulleted
Question
Chapter 7, Problem 7.6IP
To determine
The decision to open a shared facility or two separated facilities.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Suppose you come home from having earned your degree at CSUEB. Your parents own a localchain of fitness clubs that have a great reputation. Your father uses cost-plus pricing, and at themoment he is charging $200 for an annual membership, and is currently selling 800 memberships.Your parents are quite happy with their current markup above average costs
You suspect that perhaps they could be doing better and be more profitable. After consulting with the club’s manager, you learn that the cost function for annual memberships is given by c(Q)=1000+20Q+(1/20)Q2 .Further, they tell you that the own price elasticity of demand is approximately -2.5
Are your parents choosing a membership price that is maximizing profit? If not, what would yousuggest – increase the price or reduce the price? Explain
A brand that has experienced an ethical crisis is Victoria's Secret. They have sweatshops in Sri Lanka and use child labor. People are made to work 14 hours a day unpaid. Victoria's Secret has taken a massive blow to the brand in the past couple of years from the horrible information that has come out about the company. The forced labor in sweatshops is what is causing the company to go down in popularity. Not only do they have unethical practices they are also known for their discrimination of their models and pushing unrealistic body standards on young impressionable girls. Everyone knows the Victoria's Secret angels and how they are known for their perfect bodies but behind-the-scenes models faced racism and were forced to go on deadly diets. Their sizing was never inclusive of plus size until this year. They have also faced scrutiny over their "rebranding" with more diverse models but that does not cover the forced child labor they are using to make their garments. It seems it's…
Charles Lackey operates a bakery in Idaho Falls, Idaho. Because of its excellent product and excellent location, demand has increased by 45% in the last year. On far too many occasions, customers have not been able to purchase the bread of their choice. Because of the size of the store, no new ovens can be added. At a staff meeting, one employee suggested ways to load the ovens differently so that more loaves of bread can be baked at one time. This new process will require that the ovens be loaded by hand, requiring additional manpower. This is the only production change that will be made in order to meet the increased
demand.The bakery currently makes1,800 loaves per month. Employees are paid $8 per hour. In addition to the labor cost, Charles also has a constant utility cost per month of $650 and a per loaf ingredient cost of$0.40.
Part 2
what is the Current multifactor productivity for 640 work hours per month =
loaves/dollar (round your response to three decimal…
Chapter 7 Solutions
Managerial Economics: A Problem Solving Approach
Knowledge Booster
Similar questions
- Suppose the imaginary company of Roobek is a small, Reno-based American apparel manufacturer specializing in athleisure. The following table presents the brand’s total cost of production at several different quantities. Fill in the remaining cells of the following table. Quantity Total Cost Marginal Cost Fixed Cost Variable Cost Average Variable Cost Average Total Cost (Pairs) (Dollars) (Dollars) (Dollars) (Dollars) (Dollars per pair) (Dollars per pair) 0 60 — — 1 160 2 220 3 270 4 340 5 450 6 630 On the following graph, plot Douglas Fur’s average total cost (ATC) curve using the green points (triangle symbol). Next, plot its average variable cost (AVC) curve using the purple points (diamond symbol). Finally, plot its marginal cost (MC) curve using the orange points (square symbol). (Hint: For ATC…arrow_forwardBianca bakes delicious cookies. Her total fixed cost is $40 a day, and her average variable cost is $1 a bag. Few people know about Bianca’s Cookies, and she is maximizing her profit by selling 10 bags a day for $5 a bag. Bianca thinks that if she spends $50 a day on advertising, she can increase her market share and sell 25 bags a day for $5 a bag. Choose the best answer. Advertising will 1.(decrease/ increase/ not change) Bianca's 2.(variable cost/fixed cost) to produce the cookies. If Bianca advertises, in the short run, will she continue to sell her cookies for $5 a bag or will she change her price? 3. (will sell cookies at a lower price/ will sell cookies at a higher price/ will keep the price at $5 per bag)arrow_forwardSuppose the imaginary company of Roobek is a small, Cedar Rapids-based American apparel manufacturer specializing in athleisure. The following table presents the brand’s total cost of production at several different quantities. Fill in the remaining cells of the following table. Quantity Total Cost Marginal Cost Fixed Cost Variable Cost Average Variable Cost Average Total Cost (Pairs) (Dollars) (Dollars) (Dollars) (Dollars) (Dollars per pair) (Dollars per pair) 0 60 — — 1 155 2 220 3 255 4 300 5 350 6 450arrow_forward
- Two firms producing identical products may merge due to the existence of Multiple Choice economies of scope. economies of scale cost compleme arities. All of the statements are correctarrow_forwardBased on Thomas (1971). A toy company produces toys at two plants and sells them in three regions. Each plant can produce up to 4500 units. Each toy sells for $30, and the cost of producing and shipping a toy from a given plant to a region is given in the same file. The company can advertise locally and nationally. Each $1 spent on a local ad raises sales in a region by 0.3 units, whereas each $1 spent advertising nationally increases sales in each region by 0.2 units. a. Determine how the company can maximize its profit. b. If sales stimulated by advertising exhibits diminishing returns, how would you change your model?arrow_forwardSouvlaki Taverna is one of many restaurants in Athens, Greece which sell Souvlaki kebabs. All restaurants make the dish slightly differently. Use the following graph showing the demand (D), marginal revenue (MR), average variable cost (AVC), average total cost (ATC) and marginal cost (MC) curves of Souvlaki Taverna to answer the questions below. (a). The goal of Souvlaki Taverna is to maximize its profit. How many Souvlaki kebabs per day should it make? What price per kebab (in euros) should it charge? If Souvlaki Taverna maximizes its profit, how much is its total revenue? What about its total costs? What is its daily profit? What would the profit-maximizing output level of this business be if it operated in a perfectly competitive market instead? What price per kebab would it charge? Does the economic outcome in part (a) imply allocative efficiency? Why or why not? Does the economic outcome in part (a) imply productive efficiency? Why or why not?arrow_forward
- Please explain why customer research should be done. Give at least two examples for different types of research A famous companty TESLA has conducted with referencearrow_forwardHoward Millard recently opened a retail store specializing in hiking equipment and accessories. He was quite comfortable making decisions about the kinds of equipment he would stock in the store’s inventory, the décor of the retail space and his marketing strategy.An avid hiker since he was in his early teenage years and a competitive athlete, Howard knew the type of equipment that would be best to his target audience, and he knew that he needed to round out his merchandise mix with hats, shoes, energy drinks, snacks and other accessories. He was however, not certain about how to source the financing for this business venture. In speaking to a colleague he admitted that he personally did not possess the required financing to start such a business. To that end, he was cognizant of the fact that a sound business plan was necessary before approaching any potential lending institution or investor. This plan would provide details on the amount of money required and how he intends to utilize…arrow_forwardThe publisher of a magazine gives his staff the following information: Current price Current sales Current revenue Current total costs $2.00 per issue 150,000 copies per month $300,000 per month $450,000 per month He tells the staff, "Our costs are currently $150,000 more than our revenues each month. I propose to eliminate this problem by raising the price of the magazine to $3.00 per issue. This will result in our revenue being exactly equal to our cost." Refer to the table above, which of the following statements is correct? The publisher's analysis is correct only if the demand is elastic. The publisher's analysis is correct only if the demand is perfectly elastic. The publisher's analysis is correct only if the demand is unit elastic. The publisher's analysis is correct only if the demand is perfectly inelastic.arrow_forward
- Franchising is widely used in the casual dining and fast-food industry, yet Starbucks is quite successful with a large number of company-owned stores. In 2019 Starbucks had more than 8,500 company-owned stores in the United States. How do you explain this difference? Is Starbucks bucking the trend of other food- service stores, or is something else going on?arrow_forwardRoyersford Knitting Mills, Ltd. sells a line of women’s knit underwear. The firm now sells about 20,000 pairs a year at an average price of $10 each. Fixed costs $60,000, and total variable costs equal $120,000. The production department has estimated that a 10 percent increase in output would not affect fixed costs but would reduce average variable cost by 40 cents. The marketing department advocates a price reduction of 5 percent to increase sales, total revenues, and profits. The arc elasticity of demand is estimated at -2. Evaluate the impact of the proposal to cut prices on (1) total revenue, (2) total cost, and (3) total profits. If average variable costs are assumed to remain constant over a 10 percent increase in output, evaluate the effects of the proposed price cut on total profits.arrow_forwardThe Hokey Pokey, a children's day care center is thinking about changing the nature of its business. It is considering shutting down the day care center, and re-opening their business as an adult night club called the Hanky Panky. The Hokey Pokey currently makes $500 in profits. However, re-opening as the Hanky Panky will increase their profits from $500 to $1500. Friendly's Ice Cream which is currently located next to the Hokey Pokey is concerned because this move would reduce its profits by $1200. This would occur because they lose many of the families who currently come to the restaurant (some of which have their kids in the day care center.) but very few adult night club patrons are looking for ice cream. If no significant bargaining costs exists, does economic theory predict that the efficient outcome will still occur? A) Yes, the Hokey Pokey will change to the Hanky Panky because this gives them the highest profit.…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningExploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, IncManagerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher: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
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning