Young Nth Degree Systems, Inc. Samuelson, Stephen G. The core courses in an MBA program cover various areas of business such as accounting, finance, marketing, human resources, … Principles of Managerial Economics.
This document was created with Prince, a great way of getting web content onto paper. Managerial Economics 5 Role in Managerial Decision Making Managerial economics leverages economic concepts and decision science techniques to solve managerial problems.
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Click to expand Characterize each of the following statements as true or false, and explain your answer. If marginal revenue is less than average revenue, the demand curve will be downward sloping. Profits will be maximized when total revenue equals total cost.
Given a downward-sloping demand curve and positive marginal costs, profit- maximizing firms will always sell less output at higher prices than will revenue-maximizing firms. Marginal cost must be falling for average cost to decline as output expands. Marginal profit is the difference between marginal revenue and marginal cost and will always equal zero at the profit-maximizing activity level. The demand curve is the average-revenue curve. Since average revenue is falling along a downward sloping demand curve, marginal revenue is less than average revenue.
Profits are maximized when marginal revenue equals marginal cost. Profits equal zero at the breakeven point where total revenue equals total cost. Profit maximization involves setting marginal revenue equal to marginal cost.
Revenue maximization involves setting marginal revenue equal to zero. Given a downward-sloping demand curve and positive marginal costs, revenue-maximizing firms will charge lower prices and offer greater quantities of output than will firms that seek to maximize profits. Average cost will fall as output expands so long as marginal cost is simply less than average cost. If this condition is met, average cost will decline whether marginal costs are falling, rising, or constant.
Marginal profit equals marginal revenue minus marginal cost and will equal zero at the profit-maximizing activity level. Economic Optimization 29 P2. Meredith Grey is a regional sales representative for Dental Laboratories, Inc. Grey's goal is to maximize total monthly commission income, which is figured at 8 percent of gross sales. Construct a table showing Grey's marginal sales per day in each state. If administrative duties limit Grey to only ten selling days per month, how should they be spent to maximize commission income?
Calculate Grey's maximum monthly commission income. The maximum commission income is earned by allocating selling days on the basis of obtaining the largest marginal sales for each additional day of selling activity. Using the data in part A, we see that five days should be spent in Washington, three days in Oregon, and two days should be spent in Idaho.
Climate Control Devices, Inc. Boone Carlyle, an independent engineering consultant, has recommended hiring quality control inspectors so that defective thermostats can be identified and corrected before shipping. The following schedule shows the expected relation between the number of quality control inspectors and the thermostat failure rate, defined in terms of the percentage of total shipments that prove to be defective.
Construct a table showing the marginal failure reduction in units and the dollar value of these reductions for each inspector hired. How many inspectors should the firm hire?
Economic Optimization 31 C. How many inspectors should be hired if additional indirect costs lost customer goodwill and so on were to average 30 percent of direct replacement or repair costs?
If additional indirect costs total 30 percent of direct replacement costs, the marginal value of inspectors column 5 would rise by 30 percent. Also express tickets sold as a function of price. What is the revenue-maximizing ticket If variable costs are negligible, is this amount also the profit- maximizing ticket price?
This is also the profit- maximizing ticket price if variable costs and, hence, marginal costs are negligible. Total and marginal cost relations for the company are as follows: Calculate the profit-maximizing activity level. Calculate the company's optimal profit, and optimal profit as a percentage of sales revenue profit margin. DAC currently has 3, members but is planning on a membership drive to increase this number significantly. An important issue facing John Blutarsky, DAC's administrative director, is the determination of an appropriate membership level.
In order to efficiently employ scarce DAC resources, the board of directors has instructed Blutarsky to maximize DAC's operating surplus, defined as revenues minus operating costs. They have also asked Blutarsky to determine the effects of a proposed agreement between DAC and a neighboring club with outdoor recreation and swimming pool facilities. Before considering the effects of the proposed agreement with the neighboring club, calculate DAC's optimal membership and operating surplus levels.
Calculate these levels under plan A. Calculate these levels under plan B. In general, a fixed-sum increase in costs will decrease the operating surplus profit by a like amount, but have no influence on price and activity levels in the short-run. In the long run, however, both price and activity levels will be affected if cost increases depress the operating surplus profit below a normal or required rate of return. Giant Screen TV, Inc.
Calculate output, marginal cost, average cost, price, and profit at the average cost-minimizing activity level. Calculate these values at the profit-maximizing activity level.
Compare and discuss your answers to parts A and B. Engineering Mechanics Dynamics computational 1st e Engineering Mechanics Statics 12th Edition solutio Engineering Mechanics Statics 3rd Edition Solution Essentials of Modern Business Statistics with Micr Essentials of Soil Mechanics and Foundations Basic Financial Accounting An Introduction to Concepts, Financial Accounting Theory and Analysis Text and Financial and Managerial Accounting 10th Edition s Financial Reporting, Financial Statement Analysis Fiscal Administration Analysis and Applications fo Fundamentals of Advanced Accounting 4 Solution Man Fundamentals of Thermodynamics 7th Edition Solutio
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