Complete the following problems from Chapters 4 and 5 in Managerial Economics: A Problem Solving Approach. For each question, write 250-500 word explanation clearly showing how you solved the problem.
- Chapter 4: Problems 4-2 and 4-6
- Chapter 5: Problems 5-4 and 5-5
APA style is not required, but solid academic writing is expected.
This assignment uses a rubric. Please review the rubric prior to beginning the assignment to become familiar with the expectations for successful completion.
IndividualProblems
41ExtentVersusDiscreteProblems
Identifywhichofthefollowingareextentdecisions.
a.Decidewhethertoexpandanexistingproductintoanewregion.
b.Whatdiscountshouldbegivenonproductsduringtheupcomingholidaysale?
c.Shouldtheadvertisingbudgetbechangedfortheupcomingyear?
d.Shouldyoudevelopanewproductforanexistingproductline?
4.6CopierCompany
Acopycompanywantstoexpandproduction.Itcurrentlyhas20workerswhoshareeightcopiers.Twomonthsago,thefirmaddedtwocopiers,andoutputincreasedby100,000pagesperday.Onemonthago,theyaddedfiveworkers,andproductivityalsoincreasedby50,000pagesperday.Copierscostabouttwiceasmuchaswork-ers.Wouldyourecommendtheyhireanotheremployeeorbuyanothercopier?
5.4SolarPanelInstallation
Auniversityspent$1.8milliontoinstallsolarpanelsatopaparkinggarage.Thesepanelswillhaveacapacityof500kw,havealifeexpectancyof20yearsandsupposethediscountrateis10%
a.Ifelectricitycanbepurchasedforcostsof$0.10perkwh,howmanyhoursperyearwillthesolarpanelshavetooperatetomakethisprojectbreakeven?
b.Ifefficientsystemsoperatefor2,400hoursperyear,wouldtheprojectbreakeven?
c.Theuniversityisseekingagranttocovercapitalcosts.Howbigofagrantwouldmakethisprojectworthwhile(totheuniversity)?
5.5 ToyTrucks
Last year,atoymanufacturerintroducedanewtoytruckthatwasahugesuccess.Thecompanyinvested$2.5millionforaplasticinjec-tionmoldingmachine(whichcanbesoldfo
$2.0million)and$100,000inplasticinjectionmoldsspecificallyforthetoy(notvaluabletoany-oneelse).Laborandthecostofmaterialsnecessarytomakeeachtruckisabout$3.Thisyear,acom-petitorhasdevelopedasimilartoythathassignifi-cantlyreduceddemandforthetoytruck.Now,theoriginalmanufacturerisdecidingwhethertheyshouldcontinueproductionofthetoytruck.Iftheestimateddemandis100,000trucks,whatisthebreak-evenpriceforthetoytruck?Shouldyoushutdown?
1. Managerial Economics: A Problem Solving ApproachFroeb, L. M., McCann, B. T., Shor, M., & Ward, M. R. (2016). Managerial economics: A problem solving approach (4th ed.). Boston, MA: Cengage Learning. ISBN-13: 9781305259331http://gcumedia.com/digital-resources/cengage/2015/managerial-economics_ebook_4e.php
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