Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
9th Edition
ISBN: 9781259290619
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
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Chapter 5, Problem 16PAA
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You are the manager of a midsized company that assembles personal computers. You purchase most components – such as random access memory (RAM) – in a competitive market. Based on your marketing research, consumers earning over $80,000 purchase 1.5 times more RAM than consumers with lower incomes. One morning, you pick up a copy of The Wall Street Journal and read an article indicating that input components for RAM are expected to rise in price, forcing manufacturers to produce RAM at a higher unit cost.Based on this information, what can you expect to happen to the price you pay for random access memory?The price _____ for random access memory.Would your answer change if, in addition to this change in RAM input prices, the article indicated that consumer incomes are expected to fall over the next two years as the economy dips into recession?
Maybe - price may ultimately increase or decrease.
Yes - price will now decrease.
Yes - price will now be unchanged.
No - price…
You are the general manager of a firm that manufactures personal computers. Due to a soft economy, demand for PCs has dropped 50 percent from the previous year. The sales manager of your company has identified only one potential client, who has received several quotes for 10,000 new PCs. According to the sales manager, the client is willing to pay $800 each for 10,000 new PCs. Your production line is currently idle, so you can easily produce the 10,000 units. The accounting department has provided you with the following information about the unit (or average) cost of producing three potential quantities of PCs: Based on this information, should you accept the offer to produce 10,000 PCs at $800 each? Explain.
You are the general manager of a firm that manufactures personal computers. Due to a soft economy, demand for PCs has dropped 50 percent from the previous year. The sales manager of your company has identified only one potential client, who has received several quotes for 10,000 new PCs. According to the sales manager, the client is willing to pay 5800 each for 10,000 new PCs. Your production line is currently idle, so you can easily produce the 10,000 units. The accounting department has provided you with the following information about the unit (or average) cost of producing three potential quantities of PCs: 10,000 PCS15,000 PCsMaterials (PC component) $600$600 Depreciation300225 Labor150150 Total unit cost20,000 PCs $ 600150150$1,050 $975 $900 Based on this information, should you accept the offer to produce 10,000 PCs at $800 each? Explain.
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Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
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- A Nike women's-only store in California offers women's running, training, and sportswear products and also contains an in-store fitness studio for group and personal fitness training sessions. The store consistently earns profits in excess of $455,000 per year and is located on prime real estate in the center of town. The store owner pays $18,000 per month in rent for the building. A real estate agent approached the owner and informed her that she could add $7,300 per month to her firm's profits by renting out the portion of her store that she uses as a fitness studio. While the prospect of acquiring this rental income was enticing, the owner believed the use of that space as a fitness studio was an important contributor to her store's profits. What is the opportunity cost of continuing to operate the fitness studio within the store? $ __________ Note:- Please refrain from offering handwritten solutions. Please ensure that your response maintains accuracy and quality to avoid…arrow_forwardConsider a firm that has two types of employees in their marketing department with the following compensation structures. i. Sales staff that make "cold calls" to businesses to try and generate work for the firm. They are paid flat hourly wages and spend most of their time driving around to businesses to develop and curate those relationships. ii. A marketing manager that earns an annual salary, whose responsibilities are to manage the sales staff and develop a strategic marketing plan, while at the same time they make commission on the work that they bring in for the firm themselves. Based upon this description, for each type of employee identify a problem with the incenctives provided by the compensation schemes and the nature of their responsibilities. Then provide a potential solution for each, based upon our discussions of incentive design and moral hazard.arrow_forwardSuppose your current job pays you $300,000 a year. However, you are considering starting your own company. Based upon your research, you estimate your first year total revenue to be $7,500,000. There are however several costs of running the company during this first year, such as the cost of materials which will equal $2,750,000, employees who will receive in total $1,500,000, utilities which will cost $1,200,000, and rent that will be paid to the landlord that equals $1,800,000. A. solve for both your accounting profit and economic profit during this first year. B. based upon these profit values, state whether you are better off starting this company or staying in your current job.arrow_forward
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