Module 3
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Module 3
Discussion Topic 1
You’re the Subcontracts Manager at Fly'm Hi Airlines (FHA). You've got a quote from
a vendor to develop a new seating arrangement on your small regional jets to increase capacity by 20% (adding 2 rows).
You've never got a quote from them before, and they don't provide you their cost data. It's a commercial contract. What method of Price Analysis would you suggest using and why? Present your assumptions before you proceed with your suggestion. Then comment on 2 others that arrive at their conclusion.
With the scenario stating this is developing a new
seating arrangement, I am going to assume it is a project Fly’m Hi Airlines has never inquired about previously. They do not own any current jets with increased capacity or similar seating structure, leading me to believe they won’t have prior pricing or quotes to help in their analysis. These rule out Comparison to Prior Prices Paid and Comparison to Prior Quotes.
Additionally, I will assume that this is not necessarily a project that uses commodity type items and therefore Use of Estimating Relationships may not be too helpful here. This pricing analysis is good for construction projects, or projects that commodity pricing (metal, wood, pricing per pound or square foot, etc.). There is one unknown that makes it hard for me to answer this question- are they getting quotes from other vendors as well? The above states there is “a quote from a vendor” but does not state if additional quotes are being procured. If they are quoting elsewhere, I feel Comparison of Proposed Prices Received in response to the
Solicitation would be the best analysis. They can immediately find outliers in either direction (too high or too low of cost) and compare the mentioned quote to those in the same range. If they are not quoting elsewhere, I feel Comparison to Prices Paid for Similar Items is their best analysis. While they haven’t quoted this specific project, there must be an understanding of generic costs for new seating seeing as they have current jets in operation. What did they pay for their original seating arrangement? How similar is this new project to their current arrangement? Are they
procuring identical materials (seats, trays, etc.) and just changing the layout to be more efficient? All of these questions should aid in the price analysis to determine if the current quote is reasonable.
Discussion Topic 2
The U.S. Bureau of Labor Statistics has been a fantastic resource for determining the rates of deflation and inflation since 1967. That's why we compare the value of
today's dollar to the one from 1967!
Here is the link to the USBLS subject topics: http://www.bls.gov/bls/proghome.htm
Links to an external site.
Choose one of the following commodities or labor categories and arrive at the percent increase or decrease from October 2017 to October 2022 (5 years). Gasoline prices
Flat screen televisions
Laptop Computer
State how you would explain to someone who has been in a vacuum why the price has changed since 2017.
Please comment on other members of the class on their approach and how you may
address it yourself. Looking at gasoline price, October 2017 had an inflation rate of 10.8% while October 2022 was 17.5%. This is an increase of approximately 62% over the 5 year span. There are numerous reasons for this spike, the most notable shared below.
-
The war in Ukraine: gas prices hit an all time high in 2022 when the US put a ban on Russian oil importing as a result of them invading Russia. Prior to this war, the US was importing an average of 100,000 barrels of oil per day from Russia. Stopping this import caused 8-12% increase in crude oil costs. With oil
costs this high, gasoline hit an average of $5/gallon around the US.
-
Travel increased in 2022: gas prices historically follow travel demand. They tend to decrease in the summer when people are traveling less, and increase in the winter when people are traveling more. 2022 was the first full year where things started to feel slightly normal after the pandemic. 2020 was plagued with next to no non-critical travel. 2021 slowly eased into traveling, with many still too cautious to take trips. But 2022 seemed to delve back into
traveling for most people, causing travel demand not to drop as expected in the summer. Gas prices followed suit with the higher travel demand. -
Oil refineries had low storage: In 2022, the US had the lowest storage of natural gas since 2019. January 2022 was a colder than average month and record-high liquified natural gas exporting caused a shortage in US storage. Additionally, President Biden focused on moving away from gas-powered vehicles and stopped the Keystone XL pipeline after taking office. As a result, no one wanted to build new refineries if clean energy laws would be pushing them out of business.
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Related Questions
A Caterpillar tractor one of the largest farm machinery in the world has requested for your services on pricing policy for its product. One of the things the company would like to to know is how much a 5% increase in price is likely to reduce the firm’s sales. What could you require in order to advice?
arrow_forward
The global pandemic 2020 has promoted a race to capture the market for introducing effective vaccine and treatments.
(please use excel/word)
a)- If PFIZER is the sole vaccine provider given the following information, answer the questions below:
Output
Price/Unit
Total Cost
1
5500
1000
2
5000
1200
3
4500
1500
4
4000
2500
5
3500
4000
6
3000
5700
7
2500
7500
8
2000
9400
9
1500
11400
10
1000
13500
Given the tabular information above find the profit-maximizing output and price also illustrate the same using the two-dimensional labeled diagram. Show the calculation as well. (use excel)
b)- Assume if many firms enter into the business of providing vaccine determine:
How the demand curve of PFIZER would change and how it would now maximize its profit? The kind of market structure now PFIZER is forced to operate in? Also,…
arrow_forward
Pixie Arts and Graphics, a medium scale printing press business has determined the equation that
describes the relationship of the price and demand of one of its products as Price=150 - 0.01•D (D
as Demand per unit) for an annual printing of this product. The fixed costs annually = P50,000 and
the variable cost = P40 per unit.
Requirement:
a. What is the maximum profit that can be earned?
b. What is the unit price at this point of optimal demand if demand is not to be anticipated to
exceed more than 6,000 units annually?
Hint:
Profit (loss) = total revenue – total costs
= (aD – bD²) – (Cf + CyD)
arrow_forward
Panther Acre Cattle Company - Chapter 7 Lab
A typical farm or ranch problem is determining the optimum or profit-maximizing weight to sell
fed cattle. Assume the feeder cattle are purchased at 600 pounds. The feed required and the
weight gain is shown in the table below. Feed costs 7¢ per pound and feeder cattle prices are as
follows:
Weight
Price per Pound
600-899 lbs
72¢
go to 3rd
900-1099 lbs
decimal
1100 lbs or more
70¢
Point
67¢
Pay attention to the price changes when computing MVP.
Input
Output
Feed
Weight
Selling
Required Gain
Weight
Total Average Marginal Marginal Marginal
Revenue Physical Physical Value
Input
(lbs)
(lbs)
(lbs)
Product
Product
Product
Cost
600
0
0
600
432
XXX
XXX
XXX
XXX
500
50 So
650
468
0.10
0.083
1,100
145 as
745
536.40 0.132
6.158
1,700
235 aol
835
601.20
0.138
0.15
2,300
320 85
920
644
0.139
2,900
400 80
1,000
700
0.138
3,500
465 65
1,065
745, 50 0.133
4,100
525 60
1,125
753.75 0.128
4,700
575 SO
1,175
787.25 0.122
5,300
615 40
1,215
814.05 0.116
5,900
645…
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Question
6. A producer can produce 2500 units of wood
parts per day at a plant located in USA.
The steady demand for wood parts is 500
units per day. The set up cost for the
equipment to the company is $ 50.00. The
annual carrying cost for the wood part is $
1.00 per unit. The facility operates 200 days a
year:
a) Calculate the optimal run size
b) Average inventory
c) Total cost of carrying + ordering per year
d) The numbers of production run per year
e) Length of a production run in days
arrow_forward
Bill Lewis, manager of the Thomas Electronics Division, called a meeting with his controller, Brindon Peterson, and his marketing manager, Patty Fritz. The following is a transcript of the conversation that took place during the meeting:
Bill: Brindon, the variable costing system that you developed has proved to be a big plus for our division. Our success in winning bids has increased, and as a result our revenues have increased by 25%. However, if we intend to meet this year’s profit targets, we are going to need something extra—am I right, Patty?
Patty: Absolutely. While we have been able to win more bids, we still are losing too many, particularly to our major competitor, Kilborn Electronics. If we knew more about their bidding strategy, we could be more successful at competing with them.
Brindon: Would knowing their variable costs help?
Patty: Certainly. It would give me their minimum price. With that knowledge, I’m sure that we could find a way to beat them on several jobs,…
arrow_forward
Q)Vegemite has been recently introduced to the Chinese market. It sells for the equivalent of $2 per jar, and costs $0.50 per jar to make. The company’s fixed costs are $20,000. How many jars of vegemite need to be sold to break even?
arrow_forward
Marginal Profit
Yaster Breakfast Supplies is planning to manufacture and market a new toaster. After conducting
extensive market surveys, the research department provides the following estimates:
• a weekly demand of 313 at a price of $13 per toaster
• a weekly demand of 202 at a price of $17 per toaster
The financial department estimates that weekly fixed costs will be $1,379 and variable costs (cost
per unit) will be $4.
Assume:
• the relationship between price and demand is linear
the cost function in linear
Use your models to predict the marginal profit when Yaster is producing and selling 261 toasters
per week. Round to the nearest cent.
$
per toaster
arrow_forward
The variable cost to make a certain product is $71 per unit. Research indicates that the lowest price no one will pay for this product is $156. Calculate optimal price for this product. (Rounding: penny.)
arrow_forward
The list price is $671 and the net price is $543. What is the trade discount rate?
arrow_forward
XYZ company can manufacture their own products and sells them. They are able
to control the demand by changing the price that is determined by the equation
below. The company is thinking of maximizing their profit. The fixed cost is
$1,000 per month and the variable cost is $40 per unit. Find the number of units
that must be manufactured and sold monthly to maximize profit. (Demand D in
the equation is monthly) Hint: Profit = Total Revenue - Total Cost
2,700
5,000
p = $38 +
D
for D > 1
D2
1 Add file
arrow_forward
Taiwan instrument company exports computer memory chips in Japan & United States. Demand & cost functions in the two markets is given below
Japan: P= 14-Q
United States: P= 8-Q
C= 5 + 2(Q+ Q)
Find out output, profit, price level and show its graphical presentation.
arrow_forward
10. Smart Phones, Inc. buys one model of smartphone, paying $2370 per case of 20 phones.
Find the asking price for each assuming a 40% markup on cost.
arrow_forward
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 Star faces the demand and cost schedules shown in the spreadsheet that follows:
a- Create a spreadsheet using Microsoft Excel (or any other spreadsheet software) that matches the one above by entering the output, price, and cost data given.
b- Use the appropriate formulas to create three new columns (4, 5, and 6) in your spreadsheet for total revenue, marginal revenue (MR), and marginal cost (MC), respectively. [Computation check: At Q = 3,000, MR = $0.50 and MC = $0.16]. What price should the manager of the El Dorado Star charge? How many papers should be sold daily to maximize profit?
c- At the price and output level you answered in part b, is the El Dorado Star…
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Discuss the supplier evaluation and selection process.
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Q. 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 Star faces the demand and cost schedules shown in the spreadsheet that follows:
(1)
(2)
(3)
Number of newspapers per day (Q)
P
Total cost per day (TC)
0
0
2,000
1,000
$1.50
2,100
2,000
$1.25
2,200
3,000
$1.00
2,360
4,000
$0.85
2,520
5,000
$0.75
2,700
6,000
$0.65
2,890
7,000
$0.50
3,090
8,000
$0.35
3,310
9,000
$0.10
3,550
a. Create a spreadsheet using Microsoft Excel (or any other spreadsheet software) that matches the one above by entering the output, price, and cost data given.
b. Use the appropriate formulas to create three new columns (4, 5, and…
arrow_forward
Q. 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 Star faces the demand and cost schedules shown in the spreadsheet that follows:
(1)
(2)
(3)
Number of newspapers per day (Q)
P
Total cost per day (TC)
0
0
2,000
1,000
$1.50
2,100
2,000
$1.25
2,200
3,000
$1.00
2,360
4,000
$0.85
2,520
5,000
$0.75
2,700
6,000
$0.65
2,890
7,000
$0.50
3,090
8,000
$0.35
3,310
9,000
$0.10
3,550
a. Create a spreadsheet using Microsoft Excel (or any other spreadsheet software) that matches the one above by entering the output, price, and cost data given.
b. Use the appropriate formulas to create three new columns (4, 5, and…
arrow_forward
Help me please
arrow_forward
Question 2)
With regards to PESTLE, focus on and answer the economical factor with regards to the brand Knorr from South Africa.
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ECON 4333-001 (online)
Spring 2020
Homework Assignment #2-Revised
MR
This question is based on the figure above, which describes cost and demand conditions in the widget industry. Assume that costs functions to not vary according to market structure (competition vs. monopoly, for example). Complete the following table. All variables should be expressed in dollars. (Hint: use the Cowling and Mueller method for measuring consumer surplus and deadweight)
Market Structure
Price
Quantity
Economic
Profit
Consumer Surplus
Dead Weight Loss
Competition
500
400
Monopoly
The following table illustrates the distribution of retail grocery sales in the Asheville, NC market:
Market
Retailer Share (%)
Kroger…
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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…
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FITnest is one of the few fitness centers serving the greater area. The gym has been open for 3 years. It charges a flat price of $25 per visit to its clients, and the firm’s current average cost of production is $10 per visit. (You may assume that average cost has the “traditional U-shape”.)
a) The owners of the gym heard you are studying economics, and they want some advice on how they could possibly increase their profits through price discrimination, which is a concept they have heard of but do not know much about. Provide an explanation of what price discrimination is and give them an example of how they could use group pricing in their climbing gym business. Explain how group pricing works to increase their profit.
b) Given the current situation in the market for fitness in the area, would you expect to see competitors enter or exit the market? Explain.
c) Given the current market conditions, what would you predict to observe in the long run with respect to the demand for…
arrow_forward
Business Unit A, the supplying business unit, is selling to an outside market. It has excess capacity and can use it to transfer product to the receiving business unit, Business Unit B. Business Unit A does not incur incremental fixed costs in the production of the units supplied to Business Unit B. The formula to calculate the transfer price in this scenario is:?
a. (Total variable costs + incremental fixed cost) ÷ total units supplied
b. (Total variable costs + Contribution margin lost) ÷ total units supplied
c. (Total variable costs + incremental fixed costs + Contribution margin lost) ÷ total units supplied
d. Total variable costs ÷ total units supplied
arrow_forward
Specific Instructions: Identify the factor/s affecting the supply and/or demand for each of the
underlined good or service
Start from an initial equilibrium market condition (see
figure below) and then illustrate the shift/s in the supply and/or demand curve/s
Assume equal magnitude of shift in the supply and demand curves. Label all figures and use an
arrow to show the direction of the shift.
X
Q
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Please answer with details on how to do it.
A small company manufactures a certain product. Variable costs are $20 per unit and fixed costs are $10,875. The price demand relationship for this product is
P = -0.25D + 250, where P is the unit sales price of the product and D is the annual demand. Total cost = fixed cost + Variable cost, TC = CF + CV
Revenue = Demand x Price, TR = D x P
Profit = Total Revenue – Total Cost, P = TR – TC
a) Develop the equations for the total cost and total revenue. Find the breakeven quantity
c) How many units must be sold to maximize profit? What is the company’s maximum profit?
arrow_forward
PLEASE ANSWER THE FOLLOWING ASAP! THANK YOU!NOTE: DO NOT ANSWER ITEM NUMBER 1. PROCEED TO NUMBER 2 TO 5
1. After determining the total product cost of P100.00 per unit, Mr. Abecee the owner, decided to set mark-up of 15% on cost of his product. Determine the final retail price per unit of product. Show your solution.2. What is the pricing strategy used by Mr. Abecee? Briefly explain this pricing strategy.
3. How many units must be sold for Mr. Abecee to Break-even if Fixed Cost isPhp 100,000, Unit Selling Price is Php10.00 and Unit Variable cost is Php.5.00.
4. Differentiate geographical pricing from psychological pricing.
5. If you are to put -up a small start-up business with a starting capital of P50,000 ...a) What business will it be? andb) What will be your best pricing strategy? Justify.
arrow_forward
Acme Distributors has an annual demand for an airport metal
detector of 1,575 units. The unit cost of a typical detector to
Acme is $333.00. Holding cost is estimated to be 15.5% of the
unit cost, and the ordering cost is $25 per order.
a. What is the optimal order quantity (EOQ), given the current
ordering policy (without price breaks)?
[Select]
b. What is the total cost of the current ordering policy (including
the unit cost? [Select]
If Karen Powell, the owner, orders in quantities of 360 or more she
can get a 5% discount on the cost of the detectors.
c. What price should Acme pay per unit, considering the discount?
$ [Select]
d. What is the total cost at the discounted behavior? $
[Select]
e. What option should Karen Powell choose?
[Select]
arrow_forward
SEE MORE QUESTIONS
Recommended textbooks for you
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning
Related Questions
- A Caterpillar tractor one of the largest farm machinery in the world has requested for your services on pricing policy for its product. One of the things the company would like to to know is how much a 5% increase in price is likely to reduce the firm’s sales. What could you require in order to advice?arrow_forwardThe global pandemic 2020 has promoted a race to capture the market for introducing effective vaccine and treatments. (please use excel/word) a)- If PFIZER is the sole vaccine provider given the following information, answer the questions below: Output Price/Unit Total Cost 1 5500 1000 2 5000 1200 3 4500 1500 4 4000 2500 5 3500 4000 6 3000 5700 7 2500 7500 8 2000 9400 9 1500 11400 10 1000 13500 Given the tabular information above find the profit-maximizing output and price also illustrate the same using the two-dimensional labeled diagram. Show the calculation as well. (use excel) b)- Assume if many firms enter into the business of providing vaccine determine: How the demand curve of PFIZER would change and how it would now maximize its profit? The kind of market structure now PFIZER is forced to operate in? Also,…arrow_forwardPixie Arts and Graphics, a medium scale printing press business has determined the equation that describes the relationship of the price and demand of one of its products as Price=150 - 0.01•D (D as Demand per unit) for an annual printing of this product. The fixed costs annually = P50,000 and the variable cost = P40 per unit. Requirement: a. What is the maximum profit that can be earned? b. What is the unit price at this point of optimal demand if demand is not to be anticipated to exceed more than 6,000 units annually? Hint: Profit (loss) = total revenue – total costs = (aD – bD²) – (Cf + CyD)arrow_forward
- Panther Acre Cattle Company - Chapter 7 Lab A typical farm or ranch problem is determining the optimum or profit-maximizing weight to sell fed cattle. Assume the feeder cattle are purchased at 600 pounds. The feed required and the weight gain is shown in the table below. Feed costs 7¢ per pound and feeder cattle prices are as follows: Weight Price per Pound 600-899 lbs 72¢ go to 3rd 900-1099 lbs decimal 1100 lbs or more 70¢ Point 67¢ Pay attention to the price changes when computing MVP. Input Output Feed Weight Selling Required Gain Weight Total Average Marginal Marginal Marginal Revenue Physical Physical Value Input (lbs) (lbs) (lbs) Product Product Product Cost 600 0 0 600 432 XXX XXX XXX XXX 500 50 So 650 468 0.10 0.083 1,100 145 as 745 536.40 0.132 6.158 1,700 235 aol 835 601.20 0.138 0.15 2,300 320 85 920 644 0.139 2,900 400 80 1,000 700 0.138 3,500 465 65 1,065 745, 50 0.133 4,100 525 60 1,125 753.75 0.128 4,700 575 SO 1,175 787.25 0.122 5,300 615 40 1,215 814.05 0.116 5,900 645…arrow_forwardQuestion 6. A producer can produce 2500 units of wood parts per day at a plant located in USA. The steady demand for wood parts is 500 units per day. The set up cost for the equipment to the company is $ 50.00. The annual carrying cost for the wood part is $ 1.00 per unit. The facility operates 200 days a year: a) Calculate the optimal run size b) Average inventory c) Total cost of carrying + ordering per year d) The numbers of production run per year e) Length of a production run in daysarrow_forwardBill Lewis, manager of the Thomas Electronics Division, called a meeting with his controller, Brindon Peterson, and his marketing manager, Patty Fritz. The following is a transcript of the conversation that took place during the meeting: Bill: Brindon, the variable costing system that you developed has proved to be a big plus for our division. Our success in winning bids has increased, and as a result our revenues have increased by 25%. However, if we intend to meet this year’s profit targets, we are going to need something extra—am I right, Patty? Patty: Absolutely. While we have been able to win more bids, we still are losing too many, particularly to our major competitor, Kilborn Electronics. If we knew more about their bidding strategy, we could be more successful at competing with them. Brindon: Would knowing their variable costs help? Patty: Certainly. It would give me their minimum price. With that knowledge, I’m sure that we could find a way to beat them on several jobs,…arrow_forward
- Q)Vegemite has been recently introduced to the Chinese market. It sells for the equivalent of $2 per jar, and costs $0.50 per jar to make. The company’s fixed costs are $20,000. How many jars of vegemite need to be sold to break even?arrow_forwardMarginal Profit Yaster Breakfast Supplies is planning to manufacture and market a new toaster. After conducting extensive market surveys, the research department provides the following estimates: • a weekly demand of 313 at a price of $13 per toaster • a weekly demand of 202 at a price of $17 per toaster The financial department estimates that weekly fixed costs will be $1,379 and variable costs (cost per unit) will be $4. Assume: • the relationship between price and demand is linear the cost function in linear Use your models to predict the marginal profit when Yaster is producing and selling 261 toasters per week. Round to the nearest cent. $ per toasterarrow_forwardThe variable cost to make a certain product is $71 per unit. Research indicates that the lowest price no one will pay for this product is $156. Calculate optimal price for this product. (Rounding: penny.)arrow_forward
- The list price is $671 and the net price is $543. What is the trade discount rate?arrow_forwardXYZ company can manufacture their own products and sells them. They are able to control the demand by changing the price that is determined by the equation below. The company is thinking of maximizing their profit. The fixed cost is $1,000 per month and the variable cost is $40 per unit. Find the number of units that must be manufactured and sold monthly to maximize profit. (Demand D in the equation is monthly) Hint: Profit = Total Revenue - Total Cost 2,700 5,000 p = $38 + D for D > 1 D2 1 Add filearrow_forwardTaiwan instrument company exports computer memory chips in Japan & United States. Demand & cost functions in the two markets is given below Japan: P= 14-Q United States: P= 8-Q C= 5 + 2(Q+ Q) Find out output, profit, price level and show its graphical presentation.arrow_forward
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SEE MORE QUESTIONS
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Recommended textbooks for you
- Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning