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
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Question
Chapter 11, Problem 6E
a)
To determine
To describe: The Wyandotte have to reduce the price of polyol to achieve a 15 percent increase in the quantity sold.
b)
To determine
To Evaluate: the impact of such a price cut on the following:
- Total Revenue
- Total Costs
- Total Profits
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Wyandotte Chemical Company sells various chemicals to the automobile industry. Wyandotte currently sells 30,000 gallons of polyol per year at an average price of $30 per gallon. Fixed costs of manufacturing polyol are $180,000 per year and total variable costs equal $360,000. The operations research department has estimated that a 15 percent increase in output would not affect fixed costs but would reduce average variable costs by 60 cents per gallon. The marketing department has estimated the arc elasticity of demand for polyol to be –2.0.
How much would Wyandotte have to reduce the price of polyol to achieve a 15 percent increase in the quanity sold in percent?
Such a price cut would increase or decrease total revenues from $900,000 to $ ? Total costs would be $ . and total profits would be $ ?
Wyandotte Chemical Company sells various chemicals to the automobile industry. Wyandotte currently sells 30,000 gallons of polyol per year at an average price of $15 per gallon. Fixed costs of manufacturing polyol are $90,000 per year and total variable costs equal $180,000. The operations research department has estimated that a 15 percent increase in output would not affect fixed costs but would reduce average variable costs by 60 cents per gallon. The marketing department has estimated the arc elasticity of demand for polyol to be –2.0.a. How much would Wyandotte have to reduce the price of polyol to achieve a 15 percent increase in the quantity sold?b. Evaluate the impact of such a price cut on (i) total revenue, (ii) total costs, and (iii) total profits.
The table below shows cost data for WipeOutSki Company, which manufactures skis for beginners. If the company’s fixed costs are $30, what is the marginal cost X?
Quantity
Variable Cost
Fixed Cost
Total Cost
Average Variable Cost
Average Total Cost
Marginal Cost
0
0
$30
1
$10
$30
2
$25
$30
X
3
$45
$30
4
$70
$30
5
$100
$30
6
$135
$30
Group of answer choices
$15
$55
$5
Chapter 11 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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