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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Zar Island Gas Company is the sole producer of natural gas in the remote island country of Zar. The company's operations are regulated by the State Energy Commission. The demand function for gas in Zar has been estimated as: P = 1,000 − .2Qwhere Q is output (measured in units) and P is price (measured in dollars per unit). Zar Island's cost function is: TC = 300,000 + 10QThe firm's asset base is $4 million.In the absence of any government price regulation, determine Zar Island's optimal (i) output level, (ii) selling price, (iii) total profits, and (iv) rate of return on its asset base.
Motorcycles USA is a company that manufactures and distributes motorcycles in North America. It has the following demand function for its motorcycles:
P = 40,000 – 100Q
Motorcycles USA has a marginal cost (MC) that is constant and equal to $6,000.
What will Motorcycles USA’s price be if it decides to distribute the motorcycles by itself?
What will the price be if it sells them through MC Dealership, LLC an independent distributor? Should Motorcycles USA distribute the motorcycles by itself or through MC Dealership, LLC? What factors would you consider when making this decision?
Be sure to explain your calculations
Lefola Limited is the only manufacturer of product G_Easy in the Popa Land. It has provided documented levels of demand at certain selling prices for product G_Easy which are as follows:
Price per unit
Demand Units
Total costs
7 000
0
3 000
6 000
1
5 000
5 000
2
8 000
4 000
3
12 000
3 000
4
17 000
2 000
5
23 000
1 000
6
30 000
Required:
Using a tabular approach, calculate the marginal revenues and marginal costs for product G_Easy at the different levels of demand, and so determine the selling price at which Lefola Limited’s profits are maximized.
Chapter 14 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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