MICROECONOMICS (LL) W/ CONNECT
21st Edition
ISBN: 9781260923933
Author: McConnell
Publisher: MCG
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Chapter 19, Problem 2RQ
To determine
Whether the economy should select the coal powered or gas powered generator for electricity needs.
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Question 3.(LO3 Apply)
Simon Ltd is run by Simon Leather who makes leather belts for designers. He uses the finest Argentinean
leather and needs highly trained machinists to make the belts up to the quality designers expect. His beits usually sell for £50 per item and use 0.2m² of leather and 30 minutes of labor. Simon Ltd has 5 staff. They work a standard 8-hour day, 5 days a week, 48 weeks of the year. They earn £15 per hour.
Leather costs £20 per meter. Simon also has some variable overheads of £6 per unit. Fixed overheads are £28,800.
a) Calculate the number of belts Simon will have to sell to break even.
Simon decides to branch out and start to also sell handbags to the same market. The handbags sell for €250 each and use 1.5m² of leather with 1 hour of labor being required. Variable overheads are £20 per handbag.
There has been a bad case of foot and mouth in Argentina. Simon can only use the leather he has currently being shipped to him for the next…
Suppose the marginal benefit of writing a contract is $100, independent of its length. Find the optimal contract length when the marginal cost of writing a contract of length L is: (LO3)
a. MC(L) = 30 + 4L. b. MC(L) = 40 + 5L. c. What happens to the optimal contract length when the marginal cost of writing a contract declines?
Please do your own work, don't copy from the internet
Q6)
Cash flow (LO12-2) Assume a corporation has earnings before depreciation and taxes of $100,000, depreciation of $40,000, and that it has a 24 percent tax bracket.
Compute its cash flow using the following format:
Earnings before depreciation and taxes _____
Depreciation _____
Earnings before taxes _____
Taxes @ 24% _____
Earnings after taxes _____
Depreciation _____
Compute the cash flow for the company if depreciation is only $20,000.
How much cash flow is lost due to the reduced depreciation from $40,000 to $20,000?
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