Which of the following is NOT an example of a firm benefiting from economies of scope? Kleenex Corporation using paper products for both its facial tissue and paper towel business. Amazon leveraging its core competencies in IT systems into a wide range of online services, from retailing to cloud computing. Anheuser-Busch spreading its fixed costs over millions of gallons of beer produced each year. Honda using flexible manufacturing systems for quick and low cost-switching from one product to another.

Which of the following is NOT an example of a firm benefiting from economies of scope? Kleenex Corporation using paper products for both its facial tissue and paper towel business. Amazon leveraging its core competencies in IT systems into a wide range of online services, from retailing to cloud computing. Anheuser-Busch spreading its fixed costs over millions of gallons of beer produced each year. Honda using flexible manufacturing systems for quick and low cost-switching from one product to another.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter7: Economies Of Scale And Scope

Section: Chapter Questions

Problem 7.6IP

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Both Stan and Kyle own potato chip factories. Stan's factory has low fixed costs and high variable costs. Kyle's factory has high fixed costs and low variable costs. Currently, each factory is producing 5,000 bags of potato chips at the same total cost. Which of the following statements is true? Hint: If the level of output changes, only the variable costs will change. a.If both produce more, Kyle's costs will exceed Stan's costs. b.If both produce less, their costs will still be equal. c.If both produce more, their costs will still be equal. d.If both produce less, Kyle's costs will exceed Stan's costs.
Explain how Coca-Cola, Inc. takes advantage of economies of scope.
Katie's Quilts is a small retailer of quilts and other bed linen products. Katie currently purchases quilts from a large producer for $100 each and sells them in her store at a price that does not change with the number of quilts that she sells. Katie is considering vertically integrating by making her own quilts. If the fixed cost of vertically integrating is $25,000 and she can produce quilts at Homework: Homework 7 (Lecture 6) Save Score: 0 of 1 pt 6 of 10 (8 complete) HW Score: 80%, 8 of 10 pts Text Question 4.2 Ques $50 per quilt, her total cost of producing quilts, q, herself is C=25,000+50q. How many quilts does Katie need to sell for vertical integration to be a profitable decision? For vertical integration to be profitable, Katie must sell at least nothing quilts. (Enter your response rounded to the nearest whole number.)
A firm that sells e-books - books in digital form downloadable from the Internet - sells all e-books relating to do-it-yourself topics (home plumbing, gardening, and so on) at the same price. At present, the company can earn a maximum annual profit of $45,000 when it sells 20,000 copies within a year's time. The firm incurs a 30-cent expense each time a consumer downloads a copy, but the company must spend $125,000 per year developing new editions of the e-books. The company has determined that it would earn zero economic profits if price were equal to average total cost, and in this case it could sell 20,000 copies. Under marginal cost pricing, it could sell 100,000 copies. In the short run, to the nearest cent, what is the profit-maximizing price of e-books relating to do-it-yourself topics?
Assume that the most efficient production technology available for making vitamin pills has the cost structure given in the following table. Note that output is measured as the number of bottles of vitamins produced per day and that costs include a normal profit.
ADJ Enterprises produces hydrothermocorticoids. Consider the following facts about ADJ and the hydrothermocorticoid market: For each of the past three years, ADJ has earned the following profits: a Net Profit Margin of 6% and a Return on Investment of 11%. (Net Profit Margin and Return on Investment are two common measures of the profitability of a business; the exact details of Net Profit Margin and Return on Investment are not important for this question – in other words, you don’t have to know anything about Net Profit Margin and Return on Investment in order to answer this question successfully.) For the past three years, other hydrothermocorticoid producers have also earned profits of a Net Profit Margin of 6% and a Return on Investment of 11%. Producers in other industries with resources similar to ADJ have been earning profits for the past three years of: Net Profit Margin of 6% and Return on Investment of 11%. ADJ is currently operating at full capacity; that is, it has all…
Should the French government relax its AOC system, allowing French vintners to expand the size of their chateaux to capture economies of scale? Why or why not?
“Only large firms tend to enjoy lower costs due to scale of production. Do you think large firms can compete better than smaller firms and small firms will always be at the losing end because of this?” By using concepts such as economies of scale, explain whether you agree with the statement using specific examples based on an industry of your choice.
What costs and revenues do economists include when calculating profit that accountants don’t include? Economists and accountants calculate profit with the same costs and revenues. The only difference is that economists work with predicted costs and revenues for the future, whereas accountants work with costs and revenues from previous years. In addition to the explicit costs and revenues used by accountants, economists include all implicit costs and revenues when calculating profit. This means that they include opportunity costs and changes in the value of any assets owned by the firm. In addition to the implicit costs and revenues used by accountants, economists include all explicit costs and revenues when calculating profit. This means that they include labor costs and changes in the value of any assets owned by the firm. In addition to the explicit costs and revenues used by accountants, economists include all implicit costs and revenues when calculating…
Suppose that in 2018, you inherited from your grandfather a small planetarium that had been closed for several years. Your planetarium has a maximum capacity of 75 people and all the equipment is in working order. You decide to reopen the planetarium on the weekends as a new laser-tag venture called Shoot for the Stars, and much to your delight it has become an instant success, with admission tickets selling out quickly for each day you are open. Describe some of the decisions that you must make in the short run. What might you consider to be your “fixed factor”? What alternative decisions might you be able to make in the long run? Explain
Critically discuss the issues that fixed, variable and semi-variable costs can have on decisions that the management of a company must make regarding the pricing of their products.
The table below presents the average and marginal cost of producing cheeseburgers per hour at a roadside diner. Cheeseburger Production Costs Quantity(burgers per hour) Average Variable Cost (dollars) Average Total Cost (dollars) Marginal Cost (dollars) 0 — — — 10 $1.00 $6.60 $1.00 20 0.70 3.50 0.40 30 0.70 2.57 0.70 40 0.78 2.18 1.00 50 0.88 2.00 1.30 60 1.07 2.00 2.00 70 1.34 2.14 3.00 80 1.74 2.44 4.50 90 2.23 2.86 6.20 100 2.81 3.37 8.00 a. At a quantity of 40 cheeseburgers per hour, the average total cost of production is (Click to select) falling rising at a minimum and the marginal cost of cheeseburger production is (Click to select) falling rising at a minimum . b. At a quantity of 60 cheeseburgers per hour, the average variable cost of production is (Click to select) falling rising at a minimum and the average total cost of cheeseburger production is (Click to select) falling rising at a minimum .