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ECO 550 Week 6 DQ

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"Oligopoly" Please respond to the following:

From the second e-Activity, assess the marketing and pricing strategies, for example rebates, to determine the goal(s) of the marketing and pricing strategies for one of the companies you researched. Make one recommendation for changes that the company should make to better maximize profits. The Internet has made shopping for airline tickets efficient for the consumer. As a result, the industry overall is price sensitive. Suggest how the airlines can maximize profits while avoiding price wars. 


 
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ECO 550 Week 6 Chapter 11 and Chapter 12 Problem

http://www.thestudentsoffortune.com/eco-550-week-6-chapter-11-and-chapter-12-problems/

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Chapter 11

2. Ajax Cleaning Products is a medium-sized firm operating in an industry dominated by one large firm Tile King. Ajax produces a multi-headed tunnel wall scrubber that is similar to a model produced by Tile King. Ajax decides to charge the same price as Tile King to avoid the possibility of a price war. The price charged by Tile King is $20,000.

Ajax has the following short-run cost curve:

,000 - 5,000Q + 100Q2.

A. Computer the marginal cost curve for Ajax.

B. Given Ajax’s pricing strategy, what is the marginal revenue function for Ajax?

4. Unique Creations holds a monopoly position in the production and sale of manometers. The cost function facing Unique is estimated to be

TC = $100,000 + 20Q

A. What is the marginal cost for Unique?

C. What is the marginal revenue at the price computed in Part (b)?

6.  Wyandotte Chemical Company sells various chemicals to the automobile industry. Wyandotte currently sells 30,000 gallons of polyol per year at an average price of $15 per gallon. Fixed costs of manufacturing polyol are $90,000 per year and total variable costs equal $180,000. The operations research department has estimated that a 15 percent increase in output would not affect fixed costs but would reduce average variable costs by 60 cents per gallon. The marketing department has estimated the arc elasticity of demand for polyol to be –2.0.

A. How much would Wyandotte have to reduce the price of polyol to achieve a 15 percent increase in the quantity sold?

B. Evaluate the impact of such price cut on (i) total revenue, (ii) total costs, and (iii) total profits.

Chapter 12

1.  Assume that two companies (C and D) are duopolists that produce identical products. Demand for the products is given by the following linear demand function:

– Qc- Qd

Where Qc and Qd are the quantities sold by the respective firms and P is the selling price. Total cost functions for the two companies are

,000 + 100Qc

,000 + 125Qd.

Assume that the firms act independently as in the Cournot model (i.e., each firm assumes that the other firm Â’s output will not change).

A. Determine the long-run equilibrium output and selling price for each firm.

B. Determine the total profits for each firm at the equilibrium output found in Part (a). This is answer for part (a).

2.   Assume that two companies (A and B) are duopolists who produce identical products. Demand for the products is given by the following linear demand function:

– Qa - Qb

Where Qa and Qb are the quantities sold by the respective firms and P is the selling price. Total cost functions for the two companies are:

,500 + 55Qa + Q^2a

,200 + 20Qb + 2Q^2b .

Assume that the firms act independently as in the Cournot model (i.e., each firm assumes that the other firm Â’s output will not change).

B. Determine Firm A, Firm B, and total industry profits at equilibrium solution found in Part (a).

5.  Alchem (L) is the price leader in the polyglue market. All 10 other manufacturers (follower [F] firms) sell polyglue at the same price as Alchem. Alchem allows the other firms to sell as much as they wish at the established price and supplies the remainder of the demand itself. Total demand for polyglue is given by the following function ( +QF):

,000 – 4 QT

Alchem marginal cost function for the manufacturing and selling polyglue is

,000 + 5QL

The aggregate marginal cost function for the other manufacturers of polyglue is

?,000 + 4QF

B. What is the total market demand for polyglue at the price established by Alchem in Part (a)? How much of total demand do the follower firms supply?


 
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ECO 550 Week 5 DQ

http://www.thestudentsoffortune.com/eco-550-week-5-dq1/

CarlosMetz9's insight:

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"Applications of Cost Theory" Please respond to the following:

Imagine you are a manager of a chemical company. An accident has occurred in which chemicals leaked into the ground water nearby, the community is unaware. Assess the costs involved in cleaning up the water immediately (confessing) versus hiding the fact and possibly paying more in the future. Discuss the impact on profitability in both situations. From the first e-Activity, assess the factors involved in conducting a break-even analysis. Determine the conditions that may exist for a manager of this good or service may decide to move forward with operations even with the initial costs of operations is more than the potential revenue
 
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ECO 550 Week 4 DQ

http://www.thestudentsoffortune.com/eco-550-week-4-dq2/

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"Cost Analysis" Please respond to the following:

Pick a good or service. Distinguish between the short-run and the long-run production and cost function for that good or service. Discuss how price plays a role in short-run and the long-run decisions and how managers are likely to respond in each case.Using the same good or service from above. Identify the fixed and variables costs are for the good or service. Based upon the costs identified, recommend whether to produce or not produce the good or service. Provide a rationale with your response 


 
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ECO 550 Week 4 Chapter 7 and Chapter 8 Problem

http://www.thestudentsoffortune.com/eco-550-week-4-chapter-7-and-chapter-8-problems/

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Chapter 7

In the deep creek mining company described in this chapter table 7.1 suppose again that labor is the variable input and capital is the fixed input. Specifically, assume that the firm owns a piece of equipment having a 500-bhp rating.                                                      A. Complete the following tableLabor input L(#of workers

Total production TPL (=Q)

Marginal Product (MPL)

Average Product APL

1

2

3

4

5

6

7

8

9

10

`

B. Plot the (i) total product, (ii) marginal product, (iii) average product functions.

C. Determine the boundaries of these three stages of production.

6.  Consider the following short-Run production function (where input, ): 

A. Determine the marginal product
B. Determine the average product function
C. Find the value of L that maximizes Q
D. Find the value of L at which the marginal product function takes on its maximum value
E. Find the value of L at which the average product function takes on its maximum value.

8.  Based on the production function parameter estimates reported in Table 7.4:

A. Which industry (or industries) appears to exhibit decreasing returns to scale? (Ignore the issue of statistical significance.)

B. Which industry comes closest to exhibiting constant returns to scale?

C. In which will a given percentage increase in capital result in the largest percentage increase in output?

D. In what industry will a given percentage increase in production workers result in the largest percentage increase in output?

9.  Consider the following Cobb- Douglas production function for the bus transportation system in a particular city:

Q= ?L ^?1 F^?2 K^?3

Where L is the labor input in worker hours;

F is the fuel input in gallons;

K is the capital input in number of buses;

Q is the output measured in millions of bus miles 

Suppose that the parameters (a,? 1, ?2, ?3) of this model were estimated using annual data for the past 25 years. The following results were obtained:

?= 0.0012;?; ?; ?

A. Determine the (i) labor, (ii) fuel, and (iii) capital input production elasticities.

B. Suppose that labor input (worker hours) is increased by 2 percent next year (other inputs held constant). Determine the approximate percentage change in output.

C. Suppose the capital input (number of buses) is decreased by 3 percent next year (when certain older buses are taken out of service). Assuming that the other inputs are held constant, determine the approximate percentage change in output.

D. What type of return to scale appears to characterize this bus transportation system? (Ignore the issue of statistical significance.)

E. Discuss some of the methodological and measurement problems one might encounter in using time-series data to estimate the parameters of this model. 

Chapter 8

2. Howard Bowen is a large-scale cotton farmer. The land and machinery he owns has a current market value of $4M. Bowen owes his local bank $3M. Last year Bowen sold $5M worth of cotton. His variable operating costs were $4.5M; accounting depreciation was $40,000, although the actual decline in value of Bowen's machinery was $60,000 last year. Bowen paid himself a salary of $50,000, which is not considered part of his variable operating costs. Interest on his bank loan was $400,000. If Bowen worked for another farmer or a local manufacturer, his annual income would be about $30,000. Bowen can invest any funds that would be derived, if the farm were sold to earn 10% annually.(Ignore taxes)

A. Compare Bowen's accounting profits.

4.  From your knowledge of the relationships among the various production functions, complete the following table:

Q

TC

FC

VC

ATC

AFC

AVC

MC

0

125

10

5

20

10.50

30

110

40

255

50

3

60

3

70

5

80

295

6. The Blair Company has three assembly plants located in California, Georgia and New Jersey. Currently the company purchases a major subassembly, which becomes part of the final product, from an outside firm. Blair has decided to manufacture the subassemblies within the company and must now consider whether to rent one centrally located facility, where all the subassemblies would be manufactured or to rent three separate facilities, each located near one of the assembly plants, where each facility would manufacture only the subassemblies needed for the nearby assembly plant. A single, centrally located facility, with a production capacity of 18,000 units per year, would have fixed costs of $900,000 per year, and variable costs of $250 per unit. Three separate, decentralized facilities, with production capacities of 8,000, 6,000 and 4,000 units per year, would have fixed costs of $475,000, $425,000 and $400,000, respectively. Variable costs per unit produced in any of these three, decentralized facilities equal $225 (per unit). The current production rates at the three assembly plants are 6,000, 4,500 and 3,000 units per year, respectively. 

A. Assuming that the current production rates are maintained at the three assembly plants, which alternative should management select?


 
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ECO 550 Week 6 DQ

http://www.thestudentsoffortune.com/eco-550-week-6-dq1/

CarlosMetz9's insight:

http://www.thestudentsoffortune.com/eco-550-week-6-dq1/

 

"Monopolies" Please respond to the following:

From the first e-Activity, imagine this company acting as a monopoly was to have a new competitor arrive in the marketplace. Assess how the monopoly would likely change its pricing strategy to compensate for the new competition.From the first e-Activity, speculate how the monopolist could be more efficient in the long-run considering new competition has entered the marketplace


 
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ECO 550 Week 5 DQ

http://www.thestudentsoffortune.com/eco-550-week-5-dq2/

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"Prices, Output and Strategy" Please respond to the following:

Pick a good or service you are familiar. Speculate how the price for that good or service may have been set and how well this price maximizes profit for the company and determine what shifts the company should made in its pricing strategy.  Provide support for your recommendations. From the second e-Activity, discuss how the company you selected should increase its competitive stance in the marketplace and how management would implement the recommendations. Provide specific examples to support your response


 
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ECO 550 Week 5 Chapter 9 and Chapter 10 Problem

http://www.thestudentsoffortune.com/eco-550-week-5-chapter-9-and-chapter-10-problems/

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Chapter 9

3.  A study of the costs of electricity generation for a sample of 56 British firms in 1946-1947 yielded the following long-run cost function:

+ .003Q + .0000029Q^2 - .000046QZ - .026Z + .00018Z^2

where variable cost measured in pence per kilowatt-hour. (A pence was a British monetary unit equal, at that time to 2 cents U.S.)

measured in millions of kWh per year

size, measured in thousands of kilowatts

A. Determine the long-run variable cost function for electricity generation.

B. Determine the long-run marginal cost function for electricity generation.

C. Holding plant size constant at 150,000 kilowatts, determine the short-run average variable cost and marginal cost functions for electricity generation.

D. For a plant size equal to 150,000 kilowatts, determine the output level that minimizes short-run average variable costs.

E. Determine the short-run average variable cost and marginal cost at the output level obtained in Part  (D).

4.  Assuming that all other factors remain unchanged, determine how a firm’s breakeven point is affected by each of the following:

A. The firm finds it necessary to reduce the price per unit because of competitive conditions in the market.

B. The firm’s direct labor costs increase as a result of a new labor contract.

C. The Occupational Safety and Health Administration requires the firm to install new ventilating equipment in its plant. (Assume that this action has no effect on worker product

5.  Cool-Aire Corporation manufactures a line of room air conditioners. Its break even sales level is 33,000 units. Sales are approximately normally distributed. Expected sales next year are 40,000 units with a standard deviation of 4,000 units.

A. Determine the probability that Cool-Aire will incur an operating loss.

B. Determine the probability that Cool-Aire will operate above its break-even point.

Chapter 10

2.  Television channel operating profits vary from high as 45 to 55 percent at MTV and Nickelodon down to 12 to 18 percent to NBC and ABC. Provide a Porter Five Forces analysis of each type of network. Why is MTV so profitable relative to major networks?

6.  Assume that a firm is a perfectly competitive industry has the following total cost schedule

Outputs (units)

Total Cost ($)

10

$110

15

$150

20

$180

25

$225

30

$300

35

$385

40

$480

A. Calculate a marginal cost and an average cost schedule for the firm.

B. If the prevailing marketing price is $17 per unit, how many units will be produced and sold? What are the profits per unit? What are the total profits?

C. Is the industry in long-run equilibrium at this price?

10.  Which of the following products and services are likely to encounter adverse selection problems: golf shirts at traveling pro tournaments, certified gemstones from Tiffany’s graduation gift travel packages, or mail-order auto parts? Why or why not?

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ECO 550 Week 4 DQ

http://www.thestudentsoffortune.com/eco-550-week-4-dq1/

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"Production Economics" Please respond to the following:

From the e-Activity, determine the environmental variable most likely to affect the short-run production over the next 12 months. Determine what managers can do to prepare for the possible change in short-run production. Pick a real or fictitious business. Create a scenario around this business in which a manager would decide to either stop operations in the short-run or going out of business in the long-run. Provide a rationale with your response


 
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ECO 550 Week 3 DQ

http://www.thestudentsoffortune.com/eco-550-week-3-dq2/

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"Managing in the Global Economy" Please respond to the following:

Evaluate the relationship between the European Euro crisis in 2012 and the American economy. Assess how this affects American businesses and decisions made by mangers related to sustainable profitability. Provide examples with your response. Aside from maximizing profits, assess the factors that managers must consider when making the decision to outsource or integrate forwards or backwards considering which factor would be most influential for decision-making. 


 
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