Managerial Economics 5

The discussion requires a minimum of 300 words, 3 scholarly sources, including the textbook. Make sure that you use APA style with your references. Under no circumstances use any direct quotes. Any directly quoted or copied material will result in a zero for the assignment. Let’s be sure to write it in own work 100% and give appropriately when using someone’s else work.

Reference for textbook attached:

Thomas, C. R., & Maurice, S. C. (2010). Managerial economics: Foundations of business analysis and strategy (10th ed.). New York: McGraw-Hill/Irwin.

1 How does the theory of efficient production apply to managers of government bureaus or departments that are not run for profit? How about nonprofit clubs that collect just enough dues from their members to cover the cost of operation?

1,500 word count and there is a total of 3 questions each (not including in-text citation and references as the word count), a minimum of 4 scholarly sources are required in APA format. For the 4 scholarly sources, one from the textbook that’s posted below and the other two from an outside source . Let’s be sure to write it in own work 100% and give appropriately when using someone’s else work. Under no circumstances use any direct quotes. Any directly quoted or copied material will result in a zero for the assignment.

Reference for textbook attached:

Thomas, C. R., & Maurice, S. C. (2010). Managerial economics: Foundations of business analysis and strategy (10th ed.). New York: McGraw-Hill/Irwin.

General Instructions

Redstone Clayworks, Inc. is located in Sedona, Arizona and manufactures clay fire pits for patios. They are one of about two dozen firms around the world that manufacture and sell clay fire pits for retailers such as Home Depot, Lowe’s, Front Gate, and other upscale home product chains. There is virtually no product differentiation. A clay fire pit is a clay fire pit.

Assume that the world market demand and supply curves for clay fire pots intersects at $300 per unit.

The spreadsheet below gives some of Redstone’s production cost data. A template for the spreadsheet is provided in the Course Materials.

Q

TC

TFC

TVC

0

6,000

6,000

100

12,000

6,000

6,000

200

15,000

6,000

9,000

300

21,000

6,000

15,000

400

33,000

6,000

27,000

500

48,000

6,000

42,000

600

65,000

6,000

59,000

700

83,000

6,000

77,000

800

102,000

6,000

96,000

900

123,000

6,000

117,000

1000

158,000

6,000

152,000

Add columns to show, respectively, average fixed cost (AFC), average variable cost (AVC), average total cost (ATC), and short-run marginal cost (SMC). Then, add columns to show, respectively, total revenue (TR), marginal revenue (MR), total profit, average profit, and profit margin.

Place your completed spreadsheet in the Drop Box,and use it to answer questions 1-7. Your spreadsheet and calculations are worth 15 points and count as 500 words toward your word count requirement.

Your spreadsheet must include formulas showing how you arrived at the calculations. As an alternative, you may also submit a document showing your step-by-step calculations for each of the cells. You will not receive credit if you do not show your work using one of these two methods.

For Questions 2, 4, and 5, be sure to employ both of the General Rules for Implementing the Output Decision in your explanations.

A detailed explanation should be given for each question.

1 If Redstone wishes to maximize profit margin, how many units should it produce?

2 What level of output should the manager of Redstone choose to produce? Explain your choice in at least 100 words.

3 Are your output choices the same in questions 1 and 2? Why or why not? Explain using at least 100 words.

4 Make a copy of your spreadsheet and double the fixed costs. How does this change your answer to question 2? Explain in detail.

5 Make another copy of your spreadsheet and suppose that fire pits fall out of fashion causing prices fall worldwide to $85. How many units should the manager choose to produce? Explain.

6 Should the firm shut down in the short-run? Explain in detail why or why not.

7 Should the firm shut down in the long run? Explain in detail why or why not.

8 Airline industry experts generally believe that because of the “highly competitive” nature of U.S. airline markets, it is usually impossible to pass on higher jet fuel prices to passengers by raising ticket prices. What factors do you suppose contribute to making U.S. airline markets “highly competitive”? Accepting the premise that U.S. airline markets are indeed highly competitive, analyze in both the short run and long run the difficulty of raising ticket prices when jet fuel prices rise.


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