Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 10, Problem 3E
To determine
To describe: The impact of minimill technology on the profitability of the steel industry.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
an American multinational that sells consumer electronic products, has manufacturing facilities in three countries: Brazil, Thailand, and Canada. The average hourly wage rate, output per worker, and annual overhead cost for each location are as follows:
Given the above figures, is Storm currently allocating its production resources optimally? If not, what should it do? Justify your answer. Now, suppose that Storm is planning to consolidate all its manufacturing into one facility. Where should it locate? Justify your answer.
1) The joint cost (in thousands of euros) for two products X and Y can be given by the following formula: C(x, y) = 40 + y^2 + 3x + 2xy + (x^2) y + y^3
where x represents the quantity of product X that is produced and y represents the quantity of product Y produced.
• If 12 units of product X and 20 units of product Y are produced, what are the marginal costs?
• What product line should be expanded in the current level of production?
2) A firm can produce up to 500 units each week. If its average cost function is C(x) = 500/x + 1500 and its total revenue function is given by: R(x) = 1600x − x^2
• What production maximizes profit? What is the maximum profit for that production level?
• What production makes the profit equal to zero? (that point is called the break-even point)
In Bushville, residents typically either work as salaried employees or owns small business on Central Square. Salaried employees on average earn $56,000 per year. All of the stores are rented by real estate companies who own the buildings. Currently the typical store brings in $325,000 of revenue per year. The typical variable costs needed to run a store in Bushville (paying for labor, buying material, etc.) are $210,000 year.
a) What is the opportunity cost of running a store? Explain how you know this.
b) Given this opportunity cost, what rent will the real estate companies charge? Explain.
c) Suppose that a new highway brings more visitors to town, and stores on Central Square now brings in $472,000 of revenue per year with modest increase in variable costs to $236,000. What will happen to rents? Who will benefit – shop owners or the real estate companies?
Chapter 10 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
Knowledge Booster
Similar questions
- The following costs were estimated from steel operations in the US and Japan by Peter Marcus in Comparative Circumstances of Major Steel Mills in the US, European Community, and Japan (1982). Numbers represent costs per ton of steel for labor, capital machinery, and material inputs: Which country spent more on labor input? What are two possible reasons? If it costs $100 per ton to ship steel to the US, find the cost of Japanese steel in the US if Japanese profit is zero. If Japanese producers make a 2% profit, find the price of Japanese steel in the US. Would US producers want to allow less than 2% profit for the Japanese producers? Where will US producers want the trigger price?arrow_forwardFresno County, California is the largest agricultural producing county in the country and almonds are an important crop with more than 99,000 acres harvested. Each acre produces about a ton of almonds and sold at a price of $4300 a ton. The Sagardia Brothers grew 600 acres of almonds. What would happen if the Sagardia Brothers priced their almonds at $4000 a ton? They will not sell any almonds. Profits will be higher than when they sell them at the higher price. The quantity sold will be higher. They will sell the same amount of almonds, but profits will be lower.arrow_forwardAssume a restaurant operates from 11 a.m. to 11 p.m. seven days per week.a. How much capacity does the restaurant have on a weekly basis and an annual basis in hours?b. If the restaurant can serve a maximum of 40 customers per hour, how much weekly capacity does the restaurant have in terms of customers?c. What implicit assumptions are made in your calculation for part b?arrow_forward
- In this Assignment, you will define and calculate the remaining six major cost elements of a business, when given the Total Costs and the Quantity Produced, as well as to use the computed costs to determine a minimum cost output level for that business. In addition, you will compute both the break-even price and the shut-down price for a hypothetical business in a perfectly competitive market, and determine if that business would incur an economic profit at various market prices, and should the firm continue to produce at each of those price levels. Questions Table 2.a. shows an LED light bulb manufacturer’s total cost of producing LED light bulbs. Table 2.a. Cases of LED light bulbs produced in an hour Total Cost 0 $4,500 10 $4,900 20 $5,100 30 $5,300 40 $5,400 50 $5,700 60 $6,700 70 $7,900 80 $9,700 90 $11,800 1. What is this manufacturer’s fixed cost? Explain why. 2. Assuming that you only know…arrow_forwardModified True or False: State whether each statement is true or false. If the statement is false, briefly explain why it is so, and then restate it to make it true. Spreading overhead is the process of dividing total fixed costs by more units of output, which implies that average fixed cost declines as quantity declines. Diminishing returns, or decreasing marginal product, imply diminishing marginal cost. At the output level where MR = MC, if the corresponding P is above AVC but below ATC, the loss-minimizing move is to shut down or stop production. A firm that is breaking even, or earning a zero level of profit, is one that is earning exactly a normal rate of return, which implies that new investors are not attracted, but current ones are not running away either. Zero economic profit implies zero accounting profit. In the long run, if price is below average total cost, then it pays to just shut down. The shapes of long-run cost curves follow directly from the assumption of a fixed…arrow_forwardSomeday, if you want to be an economist or to study more about economic analysis, what platform you will implement to sustain the development of cost estimating fundamentals?arrow_forward
- You own AAA Audio/Video Repair. You make service calls to customers’ homes to repair their audio/video equipment such as television sets and home theater systems. Your fixed costs are $10,000 per year, and your variable costs for each service call are $20. If you charge $75 for each service call, how many service calls will you have to make in order to break even?arrow_forwardUse the firm's long-run cost-minimizing decision rule to explain the differences in the relative use of capital and labor in agriculture in the United States and the Peoples Republic of Chinaarrow_forwardIn western Kansas, corn can be grown in two ways – with or without irrigation. Dryland farmers, who do not irrigate their corn, have long-run average costs: LAC, = q² – 20q+105 and long-run marginal costs: LMC, = 3q² – 40q+105 D where q is measured in thousands of bushels. Farmers lucky enough to have water rights or river access have lower costs: Their long-run average cost is LAC, = q² – 16q+67 and their long-run marginal cost is LMC, = 3q° – 32q+ 67 - If the corn market is in long-run equilibrium, with both dryland and irrigated corn being sold, what must the price of corn be?arrow_forward
- Do you think that the taxicab industry in large cities would be subject to significant economies of scale? Why or why not?arrow_forwardShow mathematically why it would not be an economically wise move for Boeing to discontinue the 737 MAX airplanes due to the unfortunate events that occurred in 2018 and 2019. Make any assumptions you need to but state them clearly.arrow_forwardPlease select all that are true regarding Minimum Efficient Scale (MES): Quantities (x-axis) less than MES exhibit decreasing returns to scale due to diminishing marginal returns Average costs do not include fixed cost since they don't change MES is the quantity demanded where total costs for a firm are at a minimum MES is the quantity produced where average costs for a firm are at a minimum Long run average costs include fixed cost steps as quantities (scale) increase Quantities (x-axis) greater than MES exhibit decreasing returns to scale due to diminishing marginal returns Short run average cost curves are for a given level of fixed cost, individually If the quantity demanded is greater than MES, then the lowest cost solution is for one firm to supply the marketarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher: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