To find whether the price of the plane is relevant to the profit-maximizing decision and the cost that should be considered while using the plane.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 7, Problem 1RQ

To determine

To find whether the price of the plane is relevant to the profit-maximizing decision and the cost that should be considered while using the plane.

Expert Solution & Answer

Explanation of Solution

While buying the plane, T A must understand the airplane once purchased would become a fixed cost. The profit-maximizing decisions of the airlines would be dependent on the variable factors of production. The expenditure made on the plane would be accounted for as a sunk cost which cannot be recovered. Hence, T A must consider the accounting cost involved in the entire investment and optimize the profit through the shuttle service. The variable factors are to be employed in a way that the marginal returns remain high.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

Nick is planning on starting a mobile pizza oven. He is expecting his customers to spend $20 per pizza. It is estimated that the costs associated with the ingredients will be $5 per pizza. In addition, his fixed costs for renting the mobile oven is $150 per day. 1) How many pizzas does Nick need to sell to break-even per day? 2) If Nick wants to make a profit of $300 and sell 25 pizzas per day, calculate the price he should charge per pizza. 3) If Nick increases the price per pizza to the amount found in part (b) then explain the effect on the break-even number of pizzas sold. Assume the fixed costs and the variable costs remain unchanged. Do not re-calculate the break-even quantity, x, for this question however you may quote the break-even formula and contribution margin to aid your explanation.

Suppose a firm is currently maximizing profit by producing 100 units of output per day. It is then discovered that the firm owes $1,000 for a one-time tax violation that occurred a few years ago. The firm now needs to pay the $1,000 to the government no matter what. How should the firm react to this additional cost? The firm should increase output in order to increase revenue enough to cover the additional cost. The firm should continue to produce 100 units of output per day, as the $1,000 is a sunk cost and therefore has no effect on production decisions. The firm should shut down in the short run and start back up in the long run. The firm should decrease output in order to decrease variable costs by $1,000.

The utility function for commuting is u(w, t, c) = –11 · w – 3 · t – 15 · c, where w is walking time (in minutes), t is total travel time (in minutes), and c is cost (in £). How much is a typical consumer willing to pay to reduce total travel time by an hour? Enter your numerical answer in the box provided (round your answer to 1 decimal place):

Answer 2

Question

Chapter 7, Problem 1RQ

To determine

To find whether the price of the plane is relevant to the profit-maximizing decision and the cost that should be considered while using the plane.

Expert Solution & Answer

Explanation of Solution

While buying the plane, T A must understand the airplane once purchased would become a fixed cost. The profit-maximizing decisions of the airlines would be dependent on the variable factors of production. The expenditure made on the plane would be accounted for as a sunk cost which cannot be recovered. Hence, T A must consider the accounting cost involved in the entire investment and optimize the profit through the shuttle service. The variable factors are to be employed in a way that the marginal returns remain high.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 7, Problem 1RQ

To determine

To find whether the price of the plane is relevant to the profit-maximizing decision and the cost that should be considered while using the plane.

Expert Solution & Answer

Explanation of Solution

While buying the plane, T A must understand the airplane once purchased would become a fixed cost. The profit-maximizing decisions of the airlines would be dependent on the variable factors of production. The expenditure made on the plane would be accounted for as a sunk cost which cannot be recovered. Hence, T A must consider the accounting cost involved in the entire investment and optimize the profit through the shuttle service. The variable factors are to be employed in a way that the marginal returns remain high.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 7, Problem 1RQ

To determine

To find whether the price of the plane is relevant to the profit-maximizing decision and the cost that should be considered while using the plane.

Expert Solution & Answer

Explanation of Solution

While buying the plane, T A must understand the airplane once purchased would become a fixed cost. The profit-maximizing decisions of the airlines would be dependent on the variable factors of production. The expenditure made on the plane would be accounted for as a sunk cost which cannot be recovered. Hence, T A must consider the accounting cost involved in the entire investment and optimize the profit through the shuttle service. The variable factors are to be employed in a way that the marginal returns remain high.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 7, Problem 1RQ

To determine

To find whether the price of the plane is relevant to the profit-maximizing decision and the cost that should be considered while using the plane.

Expert Solution & Answer

Explanation of Solution

While buying the plane, T A must understand the airplane once purchased would become a fixed cost. The profit-maximizing decisions of the airlines would be dependent on the variable factors of production. The expenditure made on the plane would be accounted for as a sunk cost which cannot be recovered. Hence, T A must consider the accounting cost involved in the entire investment and optimize the profit through the shuttle service. The variable factors are to be employed in a way that the marginal returns remain high.

Answer 6

Chapter 7, Problem 1RQ

To determine

To find whether the price of the plane is relevant to the profit-maximizing decision and the cost that should be considered while using the plane.

Expert Solution & Answer

Explanation of Solution

While buying the plane, T A must understand the airplane once purchased would become a fixed cost. The profit-maximizing decisions of the airlines would be dependent on the variable factors of production. The expenditure made on the plane would be accounted for as a sunk cost which cannot be recovered. Hence, T A must consider the accounting cost involved in the entire investment and optimize the profit through the shuttle service. The variable factors are to be employed in a way that the marginal returns remain high.

Answer 7

Chapter 7, Problem 1RQ

To determine

To find whether the price of the plane is relevant to the profit-maximizing decision and the cost that should be considered while using the plane.

Answer 8

Expert Solution & Answer

Explanation of Solution

While buying the plane, T A must understand the airplane once purchased would become a fixed cost. The profit-maximizing decisions of the airlines would be dependent on the variable factors of production. The expenditure made on the plane would be accounted for as a sunk cost which cannot be recovered. Hence, T A must consider the accounting cost involved in the entire investment and optimize the profit through the shuttle service. The variable factors are to be employed in a way that the marginal returns remain high.