EBK MANAGERIAL ECONOMICS & BUSINESS STR
9th Edition
ISBN: 8220103676267
Author: Baye
Publisher: YUZU
expand_more
expand_more
format_list_bulleted
Question
Chapter 4, Problem 20PAA
To determine
(a)
The graphical representation of the profit function, and to analyze the effect on output and profits if a company compensates sales managers solely based on output.
To determine
(b)
To analyze:
The effect on output and profits if a company compensates sales managers solely based on profits.
To determine
(c)
To analyze the effect on output and profits if a company compensates sales managers based on profits and output.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Think of a person who likes having impact on their social networks. To do so, they always follow the las trends and adapts them to their profile (copies dance moves, open threads, answers DMs, etc.). As their number of followers increase, they are more satisfied. Let us say that this satisfaction is represented by this usefulness function u(f)=f2, where f represents the number of followers. Explain what the law of diminishing marginal returns consists of and if it is complied with in this case. Justify your answer.
Suppose that a CEO’s goal is to increase profitability and output from her company by bolstering its sales force and that it is known that profits as a function of output are π = 40q − 2q2(in millions of U.S. dollars). Graph the company’s profit function. Compare and contrast output and profits using the following compensation schemes based on the assumption that sales managers view output and profits as “goods”: (a) the company compensates sales managers solely based on output, (b) the company compensates sales managers solely based on profits, and (c) the comp
You are the manager of a firm that specializes in small single-board widgets.Your goal is to determine the number of units (Z) that must be produced and sold by your firm each month in order to maximize profits. The total benefits (revenues) and costs to your firm of producing various quantities are given in the first three columns of the following table. Based on this scenario, complete the table and answer the accompanying questions:
Control Variable
(Z)
Total Benefits
B(Z)
Total Cost
C(Z)
Net Benefits
N(Z)
Marginal Benefit
MB(Z)
Marginal Cost
MC(Z)
Marginal Net Benefit
MNB(Z)
0
0
0
1
200
10
2
380
30
3
540
60
4
680
100
5
800
150
6
900
210
7
980
280
8
1040
360
9
1080
450
10
1100
550
a. How many units (Z) maximize net benefits?b. What is the relationship between marginal benefits and marginal costs at the level of Z you determined above?c. Graph the total…
Chapter 4 Solutions
EBK MANAGERIAL ECONOMICS & BUSINESS STR
Knowledge Booster
Similar questions
- You are the manager of a firm that specializes in small single-board widgets.Your goal is to determine the number of units (Z) that must be produced and sold by your firm each month in order to maximize profits. The total benefits (revenues) and costs to your firm of producing various quantities are given in the first three columns of the following table. Based on this scenario, complete the table and answer the accompanying questions: Control Variable (Z) Total Benefits B(Z) Total Cost C(Z) Net Benefits N(Z) Marginal Benefit MB(Z) Marginal Cost MC(Z) Marginal Net Benefit MNB(Z) 0 0 0 1 200 10 2 380 30 3 540 60 4 680 100 5 800 150 6 900 210 7 980 280 8 1040 360 9 1080 450 10 1100 550 A. Graph the total cost and total benefit curves.B. On another graph, plot the points for the marginal cost, marginal benefit, and marginal net benefit.C. Show how the two…arrow_forwardNora's utility function is given by U = In(C) + In(L), where U is utility, C is consumption, and L is leisure. The total time Nora has is T = 1 and is a utility maximizer. Before the Covic pandemic, the wage rate is 10, and Nora has no non-labor income. When the pandemic hit and part of the economy was locked down, Nora's wage rate decreased to 8. However, the government provided income support by sending out a non-labor income of 5 to everyone, including Nora. Nora still has a total amount of time T = 1 for leisure and work during the pandemic. Which of the following statements is correct? O Before the pandemic, Nora's labor supply is 0.2. O Before the pandemic, Nora spent time equal to 0.2 O Before the pandemic, Nora's consumption was 9. O During the pandemic, Nora's labor supply is 0.5. leisure. O During the pandemic, Nora was better off for having a higher utility level. O During the pandemic, Nora's labor supply is unchanged becauses income effects were perfectly offset by the…arrow_forwardSuppose ABC Corp. spends $200,000 per year on some basic level of advertising, regardless of its revenues. In addition, the company spends 15 percent of each dollar of revenue on extra advertising. Write a mathematical equation that describes the functional relation between advertising (A) and revenue (R). A= (Enter your response as an expression.)arrow_forward
- The manager of a hockey arena is pricing tickets for an upcoming game. She knows that if she increases the ticket price she will sell fewer tickets. The situation is modelled by the relation, R = -88.9p^2 + 2667p, where R is the total revenue and p is the ticket price, both in dollars. The graph is given.arrow_forwardShow how to construct the reference dependent utility function for two friends Kate and Mary whose gains and losses are listed as follows: Kate's net worth is $4.5 million (decreased from $5.5 to $4.5 million) Mary's net worth $3.2 million (increased from $3 to $3.2 million) (First determine the reference point (use a parameter) and then derive reference utility function for each).arrow_forwardSuppose that the indirect utility function takes the form(p, y) = f (p)y. What is the form of the expenditure function? What is the form of the indirect compensation function, p(p; q, y) in terms of the function f (.) and y?arrow_forward
- Consider the indirect utility function: v(p1; p2; m) = m /(p1 + p2). What is the Hicksian demand function?arrow_forwarda) Consider a couple whose behaviour follows the unitary household model. Their preferences can be represented by the utility function: U(CM; CH) = min (CM, CH), where CM, denotes market goods and CH denotes home production. Each spouse can work up to 50 hours per week, and those 50 hours can be divided between market work and home production. Joe and Anna are each paid £20 per hour for market work. Joe produces £20 of home production per hour, while Anna produces £30 per hour of home production. How many hours are each of the spouses allocating to home production and market work? b) Suppose that Anna is offered a pay raise, so that her hourly market wage increases to £25, and nothing else changes. Will that change the identity of the spouse who works more hours on the market? Explain your answer. [Hint there is no need to calculate the full solution to this case]arrow_forwardConsider a couple whose behaviour follows the unitary household model. Their preferences can be represented by the utility function: U(CM; CH) = min (CM, CH), where CM, denotes market goods and CH denotes home production. Each spouse can work up to 50 hours per week, and those 50 hours can be divided between market work and home production. Joe and Anna are each paid £20 per hour for market work. Joe produces £20 of home production per hour, while Anna produces £30 per hour of home production. (a)How many hours are each of the spouses allocating to home production and market work? and Suppose that Anna is offered a pay raise, so that her hourly market wage increases to £25, and nothing else changes. Will that change the identity of the spouse who works more hours on the market? Explain your answer.arrow_forward
- = 5. Consider an economy with a single (representative) agent with utility function u(x, lc) = x¹/514/5 and an endowment of 0 units of x and 10 units of time, which the agent can use as leisure (c) or labor (L) (i.e., L + lc = 10). The agent owns a firm that produces good x using L as an input, with technology of production given by x(L) = 3√L. Let the price of x be p = 1 and let w denote the price of time (i.e., the price of leisure and the wage). Find the competitive price of time w and the competitive allocation.arrow_forwardSuppose you get two job offers when you graduate. First offer is in LA and pays $6000 permonth. The price of food in LA is $3 and price of housing is $5. The second offer is in SanFrancisco and pays $10000. Both food and housing is more expensive in SF at PF = 4 and PH = 6respectively. If your utility function is U (F, H) = F1/4 H 3/4 which job offer should you accept?arrow_forwardAnna and Bob are the only residents of a small town. The town currently funds its fire department solely from the individual contributions of these two residents. Each of the two residents has a utility function over private goods xx and total number of firemen MM, of the form: u(x,M)=2lnx+lnMu(x,M)=2lnx+lnM. The total provision of firemen hired, MM, is the sum of the number hired by each of the two persons: M=MA+MBM=MA+MB. Ann and Bob both have income of 200 each, and the price of both the private good and a fireman is 1. They are limited to providing between 00 and 200200 firemen. For the purposes of this problem, you can treat the number of firemen as a continuous variable (it could be man-years). How many firemen are hired if the government does not intervene?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education