a.
To evaluate the if the price, output, total revenue, total cost and total profit level will have maximizing franchise experience.
a.
Explanation of Solution
Given information:
Given demand function is
Marginal Cost (MC) = $6
Fixed cost = $300,000
Therefore,
Therefore,
Therefore, the output is 22,000 pound of cookies
Therefore, the price per pound of cookie is P = $28
Introduction:In economics, total cost is the amount of all the costs incurred by a business to achieve a certain level of production. It is expressed usually as a sum of all fixed costs.
b.
To evaluate the if the parent company charges each franchisee a fee equal to 5% of total revenues along with computation of the values of price, output, total revenue, total cost and total profit.
b.
Explanation of Solution
Therefore,
So the output is 21842 pound of cookies.
Therefore, the price per pound of cookie is P = $28.16
Introduction: In economics, total cost is the amount of all the costs incurred by a business to achieve a certain level of production. It is expressed usually as a sum of all fixed costs.
c.
To evaluate the if the parent company considers a fixed franchise fee structure along with computation of the values of price, output, total revenue, total cost and total profit.
c.
Explanation of Solution
Initial fixed price is $300,000. Now adding $25,000 to the fixed price is $325,000
Therefore, the output is
Therefore, the price per pound of cookie is
Introduction: In economics, total cost is the amount of all the costs incurred by a business to achieve a certain level of production. It is expressed usually as a sum of all fixed costs.
d.
To evaluate the fee arrangement recommended to be adopted by the parent company.
d.
Explanation of Solution
With 5% fee arrangement, overall profit is $153,265. It can receive per unit of $30,753
Introduction: In economics, total cost is the amount of all the costs incurred by a business to achieve a certain level of production. It is expressed usually as a sum of all fixed costs
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Chapter B Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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- Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning