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# Output & Costs

### Managerial Economics

Assume Nail Mania advertises in the local newspaper. Each day it advertises costs \$100. Over the past several months, Nail Mania has conducted market research and developed the following information Number of days advertised per week Number of customers per week 0

### Investigate the economic feasibility of a new lock box system.

The Apollo Products Company currently collects all of its customer payments in Detroit. By going to a new lock box system with boxes in Los Angeles, Boston, and Atlanta, Apollo Products can reduce the total time it takes to convert customer payments into available funds by an average of 4.50 days. The firm collects an average of

### You've been hired as a managing consultant by an unprofitable firm to determine whether it should shut down its operation. The firm currently uses 70 workers to produce 300 units of output per day. The daily wage (per worker) is \$100, and the price of the firm's output is \$30. The cost of other variable inputs is \$500 per day. Although you don't know the firm's fixed cost, you know that it is high enough that the firm's total costs exceed its total revenue. You know that the marginal cost of the last unit is \$30. Should the firm continue to operate at a loss? Yes or No. Carefully explain your answer. (show all your calculations).

You've been hired as a managing consultant by an unprofitable firm to determine whether it should shut down its operation. The firm currently uses 70 workers to produce 300 units of output per day. The daily wage (per worker) is \$100, and the price of the firm's output is \$30. The cost of other variable inputs is \$500 per day. A

### Find firm's profit-maximizing (or loss minimizing) output

Suppose that a perfectly competitive firm faces a market price (P) \$5 per unit, and at this price the upward-sloping portion of the firm's marginal cost curve crosses its marginal revenue curve at an output (Q) level of 1,500 units. If the firm produces 1,500 units, its average variable costs (AVC) equal \$5.50 per unit, and its

### Generic Competition is discussed.

The Federal Trade Commission seeks to ensure that the process of bringing new low-cost generic alternatives to the marketplace and into the hands of consumers is not impeded in ways that re anticompetitive. To illustrate the potential for economic profits from delaying generic drug competition for one year, consider cost and dem

### Maximizing profit in two distinct markets.

Ann McCutcheon is hired as a consultant to a firm producing ball bearings. This firm sells in two distinct markets, each of which is completely sealed off from the other. The demand curve for the firm's output in the first market is P1 =160 - 8Q1, where P1 is the price of the product and Q1 is the amount sold in the first market

### Can you reduce the cost of producing pots by adding a pottery machine?

Your firm produces clay pots entirely by hand even though a pottery machine exists that can make clay pots faster than a human. Workers cost \$80 per day and each additional worker can produce 20 more pots per day (i.e., marginal product is constant and equal to 20). Installation of the first pottery machine would increase output

### Economies of scale and Wal-Mart's competitive advantage

Determine and discuss whether economies of scale have relevance to such companies as Wal-Mart.

### Production function

Crew Brew produces a popular brand of beer in its mini-brewery located on a small river in Kentucky. It uses a special formula, combined with the fresh water from the local stream, to produce a drink popular with local folks and tourists who visit during the summer fishing season, and autumn deer hunting season. The production f

### Days of advertising are determined.

Assume Nail Mania advertises in the local newspaper. Each day it advertises costs \$100. Over the past several months, Nail Mania has conducted market research and developed the following information Number of days advertised per week Number of customers per week 0

### Find the profit maximizing price and output for a barber shop.

Joe's Barber Shop has a daily total cost function of TC = 100 + 4Q + Q^2 and the daily demand for his services is Q = 50 - 2P What is the profit maximizing price that Joe should charge for his services?

### good x is produced in a competitive market using input a. Explain what would happen to the supply of good x in each of the following situations. A. the price of input a increases. b. an excise tax of \$1 is imposed on good x. c. an ad valorem of 5% is imposed on good x d. a technological change reduces the cost of producing additional units of good x.

good x is produced in a competitive market using input a. Explain what would happen to the supply of good x in each of the following situations. A. the price of input a increases. b. an excise tax of \$1 is imposed on good x. c. an ad valorem of 5% is imposed on good x d. a technological change reduces the cost of producing add

### Explore total profits.

The Industry demand function for bulk plastics is represented by the following equation: P=800-20Q Where Q represents millions of pounds of plastic. The total cost function for the industry, exclusive of a required return on invested capital, is: TC=300+500Q+10Q^2 where Q represens millions of pounds of plastic a. If this in

### trade volume; AVC; elasticity of cost

Power Brokers, Inc., a discount brokerage firm, is contemplating opening a new regional office in Providence, Rhode Island. An accounting cost analysis of monthly operating costs at a dozen of its regional outlets reveals average fixed costs of \$4,500 per month and average variable costs of: AVC=\$59-\$0.006Q Where AVC is avera

### Managerial economics

1. Industry studies often suggest that firms may have long-run average cost curves that show some output range over which there are economics of scale and a wide range of output over which long run average cost is constant; finally, at very high output there are diseconomics of scale a. draw a representative long run average

### Economics: mosquito control exercise

Suppose there are only two individuals in society. Person A's demand curve for mosquito control is given by: [Note: let "_" denote a subscript] q_n = 100 - p for person B, the demand curve for mosquito control is given by: q_b 200 - p A. Suppose mosquito control is a pure public good; that is, once it is produced,

### Demonstrate Hungarian method and EOQ.

In making inventory decisions, the purpose of the basic EOQ model is to minimize a. carrying costs. b. ordering costs. c. stock on hand. d. the sum of carrying costs and ordering costs. If the addition of a constraint to a linear programming problem does not change the feasible solution region, the constraint is said

### A firm estimates its long-run production function to be Q= -0.0075K3L3 + 12K2L2. If the firm fixes its K use at 12 units, what are this firm's TP, MP, and AP equations?

Please see the attached file. 1) A firm estimates its long-run production function to be Q= -0.0075K3L3 + 12K2L2. If the firm fixes its K use at 12 units, what are this firm's TP, MP, and AP equations? 2) Suppose a firm's TVC function is TVC = 96Q - 2Q2 + 0.05Q3 a. What is this firm's AVC equation? b. What is this fi

### Managerial Economics - El Dorado Star

The El Dorado Star is the only newspaper in El Dorado, New Mexico. Certainly, the Star competes with The Wall Street Journal, USA Today, and the New York Times for national news reporting, but the Star offers readers stories of local interest, such as local news, weather, high-school sporting events, and so on. The El Dorado Sta

### Valuation.

Valuation Use the information provided to estimate the value of XYZ under each of the six assumptions. Assume that XYZ Company generated cash flows of \$2.00 per share last year. XYZ's cost of capital is 12%. Estimate the value per share of XYZ for each of the following sets of assumptions. 1. No future growth is expected.

### Pure Competition and Relationship to Cost

A firm in pure competition would shut down when: price is less than average total cost price is less than average fixed cost price is less than marginal cost price is less than average variable cost

### A short-run for a purely competitive market is examined.

In the short-run for a purely competitive market, a manufacturer will stop production when: the total revenue is less than total costs the contribution to fixed costs is zero or less the price is greater than AVC operating at a loss a and b

### Pure Competition

In pure competition: the optimal price-output solution occurs at the point where marginal revenue is equal to price a firm's demand curve is represented by a horizontal line a firm is a price-taker since the products of every producer are perfect substitutes for the products of every other producer a and b

### Average total cost is determined.

1)If Redstone wanted to minimize average total cost, it would produce how many units? 2). If Redstone wishes to maximize profit MARGIN, it should produce how many units. 3) What level of output should the manager of Redstone choose to produce? Explain briefly 4. Now triple the fixed costs to 15,000 in your spreadsheet.

### Estimating Ending Inventory Cost

Jan-begiining Inventory \$300,260.00 Cost of goods purchased \$939,050.00 Sales \$ 1,191,150.00 Sales returns \$9,450.00 gross profit rate average 35% Use the gross profit method to estimate the ending inventory.

### The Opportunity Cost of Attending College

What is the opportunity cost of attending college? i.e avg cost for a degree, the salary of a high school grad vs college grad. What is the best alternative you give up to attend college?

### Perfectly competitive firms are explicated.

A perfectly competitive firms earns zero economic profits in the long run due to the entry and exit of firms in the market. a. Solve for the level of output produced in the long run by a perfectly competitive firm and show graphically. b Provide second order conditions c. Demonstrate that profits are zero at this level