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# BUS 640 All New Assignments

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Week 1

Problem 1:

## A generous university benefactor has agreed to donate a large amount

of money for student scholarships. The money can be provided in one
lump sum of \$12 million in Year 0 (the current year), or in parts, in
which \$7 million can be provided at the end of Year 1, and another \$7
million can be provided at the end of Year 2.

whenever it is necessary. Show all of your calculations and processes
for the following points:

Assuming the opportunity interest rate is 8%, what is the present value
of the second alternative mentioned above? Which of the two
alternatives should be chosen and why?

## How would your decision change if the opportunity interest rate is

12%?
Provide a description of a scenario where this kind of decision between
two types of payment streams applies in the real-world business
setting.

Problem 2:

## The San Diego LLC is considering a three-year project, Project A,

involving an initial investment of \$80 million and the following cash
inflows and probabilities:

Year 0

## Initial Investment \$80 million discount rate 8%

Year 1 Probability .2 Cash flow \$50 million, Probability .3 Cash flow \$40
million,Probability .4 Cash flow \$30 million,Probability .1 Cash flow \$20
million

Year 2 Probability .1 Cash flow \$60 million, Probability .2 Cash flow \$50
million,Probability .3 Cash flow \$40 million,Probability .4 Cash flow \$30
million

Year 3 Probability .3 Cash flow \$70 million, Probability .4 Cash flow \$60
million,Probability .1 Cash flow \$50 million,Probability .2 Cash flow \$40
million
whenever it is necessary. Show all of your calculations and processes
for the following points:

## Describe and calculate Project As expected net present value (ENPV)

and standard deviation (SD), assuming the discount rate (or risk-free
interest rate) to be 8%. What is the decision rule in terms of ENPV?
What will be San Diego LLCs decision regarding this project? Describe

## The company is also considering another three-year project, Project B,

which has an ENPV of \$32 million and standard deviation of \$10.5
million. Project A and B are mutually exclusive. Which of the two
projects would you prefer if you do not consider the risk factor?
Explain.

## Describe the coefficient of variation (CV) and the standard deviation

(SD) in connection with risk attitudes and decision making. If you now
also consider your risk-aversion attitude, as the CEO of the San Diego
LLC will you make a different decision between Project A and Project B?
Why or why not?

## Please complete the following two applied problems:

Problem 1:
Patricia is researching venues for a restaurant business. She is
evaluating three

location, and

## price. The value she places on each attribute, however, differs

according to what

## type of restaurant she is going to start. If she opens a restaurant in a

suburban

area of Los Angeles, then taste is the most important attribute, three
times as

a

three

## considering two venues, respectively, a steak restaurant and a pizza

restaurant,

both of which are priced the same. She has rated each attribute on a
scale of 1 to

Attribute

Taste

Location
Price

each

## question in complete sentences.

a. Which of the two options should Patricia pursue if she wants to open
a

## restaurant in a suburban area of Los Angeles? Calculate the total

expected

utility from each restaurant option and compare. Graph is not required.

b. Which of the two options should she pick if she plans to open a
restaurant

restaurant

## metropolitan area as 0.3? Describe your reasoning and show your

calculations.
d. Provide a description of a scenario in which this kind of decision
between

the

Problem 2:

follows:

is the

thousands

the

each

## question in complete sentences, whenever it is necessary.

a. Calculate the price elasticity of demand for Newtons Donuts and
describe

Donuts.

## c. If the cost of producing Newtons Donuts is constant at \$0.15 per

donut,

should they reduce the price and thereafter, sell more donuts
(assuming

Reference:

Bridgepoint

Education

## Please, complete the following 3 applied problems in a Word or Excel

document. Show all your

drop box by using the
Assignment Submission button.

## transports locally grown vegetables to San Diego, California. The

company owns 5 large rigs and

hires local drivers paid fixed salaries monthly, regardless of the number
of trips or tons of cargo

that each driver transports each month. The below table presents

staff levels.

Drivers employed

## Total Cargo Transported (tons)

Which inputs are fixed and which are variable in the production
function of Jennifer

constant

## b. What number of drivers appears to be most efficient in terms of

output per driver?

## c. What number of drivers appears to minimize the marginal cost of

transportation
assuming that all drivers are paid the same salary?

## 1. 2. The Palms Dry Cleaning Shop in Fort Lauderdale, Florida, faces a

highly seasonal demand for

## its services, as the snow-birds retirees flock to Florida in mid-fall to

enjoy the mild winter

weather and then return to their main homes in mid-spring. Given this
seasonality, Palms tries to

keep the overhead costs as low as possible and therefore, often uses
seasonal contracted labor to

man its operations. The following table shows the labor costs in each
month of operation over the

past 12 months as well as the total number of garments that were dry-
cleaned in each month.

Palms pays fixed wages per hour to each employee, and we can assume
that the costs of other

## variable inputs (such as chemicals, electricity, etc) have remained

constant.

Month

June

July

August

September
October

TVC (\$)

a. Derive average variable cost (AVC) data from the data in this table.

## b. Use gradient analysis to provide an estimate of eleven data points

that seem to

represent the MC curve over this range of outputs. Plot these data
points and sketch in

estimated MC and AVC curves that seem to best fit these data points.

## c. Suppose that demand is estimated to move from its present (May)

level of 3,500

units to 4,000 units next month (June). What is the incremental cost of
meeting this

demand?

d. Assuming that Palms price to dry clean a garment has been constant
at \$15 over the

past year, and will remain at that level, what contribution to overheads
and profit can

it expect in June?
2. 3. Over the past 12 months the Four Winds Novelty Company firm
has recorded its internet sales

(equals monthly output levels) and its monthly total variable costs
(TVC) for a particular novelty

item as shown in the following table. Sales have grown over this period
with relatively few

## shocks due to uncontrollable weather, political and sporting events.

This online retailer carries no

## from a supplier and ships it out to the customer.

Sales = Output

TVC (\$)

102,813

a.

Using regression analysis, find an equation that best fits the data to
represent the

TVC function.
b. At what sales/output level will marginal costs (MC) reach a
minimum?

c. Estimate the value of TVC for sales/output level 250,000 units, and
calculate the

Problem 1:

## produces vacuum cleaners and belongs to a monopolistically

competitive market. Its

is the number of

have determined

0.02Q2.

each question in

## complete sentences, whenever it is necessary.

a. What are the profit-maximizing price and output levels? Explain them
and calculate

(marginal

## cost), D (demand), and MR (marginal revenue) curves graphically and

illustrate the

equilibrium point.

b. How much economic profit do you expect that Roberts company will
make in the

first year?

## c. Do you expect this economic profit level to continue in subsequent

years? Why or

why not?

Problem 2:

Greener Grass Company (GGC) competes with its main rival, Better
Lawns and Gardens

## (BLG), in the supply and installation of in-ground lawn watering systems

in the wealthy

western suburbs of a major east-coast city. Last year, GGCs price for
the typical lawn

system was \$1,900 compared with BLGs price of \$2,100. GGC installed
9,960 systems, or
about 60% of total sales and BLG installed the rest. (No doubt many

## were installed by do-it-yourself homeowners because the parts are

hardware stores.)

## GGC has substantial excess capacityit could easily install 25,000

systems annually, as it

has all the necessary equipment and can easily hire and train installers.
Accordingly, GGC

## is considering expansion into the eastern suburbs, where the

homeowners are less wealthy.

In past years, both GGC and BLG have installed several hundred
systems in the eastern

suburbs but generally their sales efforts are met with the response that
the systems are too

expensive. GGC has hired you to recommend a pricing strategy for both
the western and

eastern suburb markets for this coming season. You have estimated
two distinct demand

functions, as follows:

## for the western market and

Qe = 36620 - 25Pge + 7Pbe + 1180Ag - 950Ab + 0.085Ye

for the eastern market, where Q refers to the number of units sold; P
refers to price level; A

## refers to advertising budgets of the firms (in millions); Y refers to

average disposable

## income levels of the potential customers; the subscripts w and e refer

to the western and

and BLG,

## household disposable income is \$60,000 in the western suburbs and

\$30,000 in the eastern

suburbs. GGC does not expect BLG to change its price from last year
because it has

already distributed its glossy brochures (with the \$2,100 price stated) in
both suburbs, and

its TV commercial has already been produced. GGCs cost structure has
been estimated as

## TVC = 750Q + 0.005Q2, where Q represents single lawn watering

systems.
each item below in

## a. Derive the demand curves for GGCs product in each market.

b. Derive GGCs marginal revenue (MR) and marginal cost (MC) curves
in each

market. Show graphically GGCs demand, MR, and MC curves for each
market.

and the prices

these in

qualifications

Reference:

## 1. Your company, Bright Paints, is one of a dozen companies

manufacturing a special reflective paint used for traffic signs. The State
Department of Transportation has called for tenders to supply 10,000
gallons of blue reflective paint to be delivered within two months. You
can foresee fitting in a production run of the blue paint and have
decided to bid on the job. You calculate your incremental costs for this
job to be \$76,200. This particular contract is standard, similar in all in
respects to hundreds of contracts you have bid on over the past few
years. Your pricing policy has been to apply a mark-up to incremental
costs to arrive at the bid price. Your mark-up has been higher when you
had plenty of orders and lower when you had few or no orders to fulfill.
You have assembled data relating the mark-up rate used and the
percentage of contracts won at each mark-up rate, as follows.

## Mark-up rate (%) Percentage of contracts won at that rate (%)

0 95.9

10 84.8

15 65.4

20 41.3

25 15.7

30 3.0

35 0

A. Why would your company have bid with a zero mark-up on some
past tenders? Why didnt it win all of those contracts?

## b. What is the bid price that maximizes the expected contribution of

the contract?
c. Why, or why not, is the fixed-price mode of bidding likely to be the
best one to use for this contract?

## 2. In calculating the incremental cost of a particular project, how would

you treat the possible future costs of a lawsuit that may occur as a
result of this project, where the cost of the lawsuit might range from
\$10,000 to \$500,000 with an associated probability distribution?

## Research a specific company of your choice and identify some of the

managerial decisions that were made over time and in response to
changes in its market or competitive environment. Use Ashford
University Online library and web-based resources for your research. At
least 3 external resources must be used. Address all of the following
areas:

## Focus of the Final Paper

Describe the company and provide a brief history of its operations. Find
or use graphs to illustrate its financial performance over the years.

## Identify any sources of risk or uncertainty in its operations. Do the

financial reports indicate risky or uncertain activities or changes to the
economic environment that ultimately appear to have affected the
companys financial outcomes? Be specific.
Are there any government regulations that have affected this
companys operations domestically or abroad? Explain.

Describe the inputs that are used in this companys production function
and identify any challenges to securing these inputs.

## Determine if the company has introduced new products in existing

markets or created new markets over time. What is the impact on its
finances?

## Determine if the price of its products increased or declined over time

and analyze the reasons for price fluctuations. Study the demand
elasticity for its products and discuss the availability of close substitutes
for its products. How does that affect pricing decisions?

## Analyze the companys profitability. Identify the economy or industry

influences on its costs, operations, and profitability.

## Describe the competitive environment in which the firm operates, the

distribution of market power, and the strategic behavior of the firm and
its competitors. Apply your knowledge of the theory of this companys
market structure. How does the company make pricing and production
decisions? Is your observation supported by the theoretical models?
Refer to the financial reports for illustration.

## Identify any non-price competitive strategies that the company might

be engaging in? Provide specific examples.

Evaluate if the company made any mistakes in its decisions over time,
and recommend any changes or improvements for the future
operations. Refer to the financial reports when making specific
observations or recommendations.
Use economic language and demonstrate your understanding of the
concepts and theories of this course.

## 1. Must be 8 to 10 double-spaced pages in length, and formatted

according to APA style as outlined in the Ashford Writing Center.

## 2. Must include a title page with the following:

a. Title of paper

b. Students name

## c. Course name and number

d. Instructors name

e. Date submitted

## 3. Must begin with an introductory paragraph that has a succinct thesis

statement.
4. Must address the topic of the paper with critical thought.

Writing Center.

## 8. Must include a separate reference page, formatted according to APA

style as outlined in the Ashford Writing Center.

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BUS 640 Week 1 DQ 1 Firm Objectives

## BUS 640 Week 1 Economics of Risk and Uncertainty Applied Problems

BUS 640 Week 1 Economics of Risk and Uncertainty Applied Problems
(New)

Problems

Problems (New)

Problems

Problems (New)

Problems

Problems (New)

## BUS 640 Week 5 DQ 2 New Product Introduction

BUS 640 Week 5 Price Quotes and Pricing Decisions Applied Problems

BUS 640 Week 5 Price Quotes and Pricing Decisions Applied Problems
(New)

## BUS 640 Week 6 Final Paper (Wal-mart)

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Firm Objectives. Why do some business firms pursue a triple-bottom-
line outcome while others focus only on profit maximization? Please,
use a real company example to illustrate your points

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Decision Making Under Uncertainty. To save on gasoline expenses,
Edith and Mathew agreed to carpool together for traveling to and from
work. Edith preferred to travel on I-20 highway as it was usually the
fastest, taking 25 minutes in the absence of traffic delays. Mathew
pointed out that traffic jams on the highway can lead to long delays
making the trip 45 minutes. He preferred to travel along Shea
Boulevard, which was longer (35 minutes), but rarely had traffic jams.
Edith agreed that in case of traffic jams, Shea Boulevard was a
reasonable alternative. Neither of them knows the state of the highway

After driving to work on the I-20 highway for 1 month (20 workdays),
they found the highway to be jammed 3 times. Assuming that this
month is a good representation of all months ahead, should Edith and
Mathew continue to use the highway for traveling to work?

How would you conclusion change for the winter months, if bad
weather makes it likely for traffic jams on the highway to increase to 6
days per month?

## How would your conclusion change if Mathew purchased a new smart-

phone app that could show the status of the highway traffic prior to
their drive each morning, thus reducing the probability of them getting
into a jam down to only 1day per month (where on this day, the app
showed no traffic jam, but a jam developed in the meantime as they
were driving along the highway).

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## BUS 640 Week 1 Economics of Risk and Uncertainty Applied

Problems (New)
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BUS640 week 1 Assignment Problem 1: A generous university
benefactor has agreed to donate a large amount of money for student
scholarships. The money can be provided in one lump sum of \$12
million in Year 0 (the current year), or in parts, in which \$7 million can
be provided at the end of Year 1, and another \$7 million can be
provided at the end of Year 2. Describe your answer for each item
below in complete sentences, whenever it is necessary. Show all of
your calculations and processes for the following points: Assuming the
opportunity interest rate is 8%, what is the present value of the second
alternative mentioned above? Which of the two alternatives should be
chosen and why? How would your decision change if the opportunity
interest rate is 12%? Provide a description of a scenario where this kind
of decision between two types of payment streams applies in the real-
world business setting. Problem 2: The San Diego LLC is considering a
three-year project, Project A, involving an initial investment of \$80
million and the following cash inflows and probabilities: Year 0 Initial
Investment \$80 million discount rate 8% Year 1 Probability .2 Cash flow
\$50 million, Probability .3 Cash flow \$40 million,Probability .4 Cash flow
\$30 million,Probability .1 Cash flow \$20 million Year 2 Probability .1
Cash flow \$60 million, Probability .2 Cash flow \$50 million,Probability .3
Cash flow \$40 million,Probability .4 Cash flow \$30 million Year 3
Probability .3 Cash flow \$70 million, Probability .4 Cash flow \$60
million,Probability .1 Cash flow \$50 million,Probability .2 Cash flow \$40
whenever it is necessary. Show all of your calculations and processes
for the following points: Describe and calculate Project As expected net
present value (ENPV) and standard deviation (SD), assuming the
discount rate (or risk-free interest rate) to be 8%. What is the decision
rule in terms of ENPV? What will be San Diego LLCs decision regarding
another three-year project, Project B, which has an ENPV of \$32 million
and standard deviation of \$10.5 million. Project A and B are mutually
exclusive. Which of the two projects would you prefer if you do not
consider the risk factor? Explain. Describe the coefficient of variation
(CV) and the standard deviation (SD) in connection with risk attitudes
and decision making. If you now also consider your risk-aversion
attitude, as the CEO of the San Diego LLC will you make a different
decision between Project A and Project B? Why or why not?

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## BUS 640 Week 2 Consumer Demand Analysis and Estimation

Applied Problems (New)

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Week 2 Assignment Consumer Demand Analysis and Estimation Applied
Problems Please complete the following two applied problems:
Problem 1: Patricia is researching venues for a restaurant business. She
is evaluating three major attributes that she considers important in her
choice: taste, location, and price. The value she places on each
attribute, however, differs according to what type of restaurant she is
going to start. If she opens a restaurant in a suburban area of Los
Angeles, then taste is the most important attribute, three times as
important as location, and two times as important as price. If she opens
a restaurant in the Los Angeles metropolitan area, then location
becomes three times as important as taste and two times as important
as price. She is considering two venues, respectively, a steak restaurant
and a pizza restaurant, both of which are priced the same. She has
rated each attribute on a scale of 1 to 100 for each of the two different
types of restaurants. Attribute Steak Restaurant Pizza Restaurant Taste
80 70 Location 55 80 Price 65 50 Show all of your calculations and
sentences. Which of the two options should Patricia pursue if she wants
to open a restaurant in a suburban area of Los Angeles? Calculate the
total expected utility from each restaurant option and compare. Graph
Which of the two options should she pick if she plans to open a
and show your calculations. Which option should she pursue if the
probability of finding a restaurant venue in a suburban area can be
reliably estimated as 0.7 and in a metropolitan area as 0.3? Describe
scenario in which this kind of decision between two choices, based on
weighing their underlying attributes, applies in the real-world
business setting. Furthermore, what are the benefits and drawbacks, if
any, to this method of decision making? Problem 2: The demand
function for Newtons Donuts has been estimated as follows: Qx = -14
54Px + 45Py + 0.62Ax where Qx represents thousands of donuts; Px is
the price per donut; Py is the average price per donut of other brands
of donuts; and Ax represents thousands of dollars spent on advertising
Newtons Donuts. The current values of the independent variables are
Ax=120, Px=0.95, and Py=0.64. Show all of your calculations and
sentences, whenever it is necessary. Calculate the price elasticity of
demand for Newtons Donuts and describe what it means. Describe
show your calculations. If the cost of producing Newtons Donuts is
constant at \$0.15 per donut, should they reduce the price and
thereafter, sell more donuts (assuming profit maximization is the
companys goal)? Should Newtons Donuts spend more on advertising?

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BUS 640 Week 2 DQ 1 Marginal Rate of Substitution

## Marginal Rate of Substitution. What is the marginal rate of substitution

(MRS) and why does it diminish as the consumer substitutes one
product for another? Use examples to illustrate

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BUS 640 Week 2 DQ 2 Demand Elasticity

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the required readings section for this week. The tobacco industry is a
prime example to consider when talking about price elasticity of
demand. While nicotine use can be addictive for many users, it is not
addictive for the so-called "social smokers".

What can we say about the price elasticity of demand for nicotine
products (such as cigarettes, pipes, tobacco) in the group of nicotine
addicted users, versus the group of "social smokers"? Can we say
whose demand is likely to be more elastic? Why?

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Relevant Costs. Two partners own together a small landscaping
business in North Carolina, called Summer Lawn Care. They have been
specializing in summer grass seeding, installation, and maintenance.
Recently, the partners acquired special technology and know-how for
winter grass installations and maintenance. They also added a tree
cutting service as recent storms in the area had caused demand for this
service to soar. One of the partners insists that the name of the
business should change to Lawn and Tree Care, so that it better reflects
the range of services and, thus, generates more customer interest, and
thus contracts. The second partner wants to keep the old name and
signage, and ads in Yellow Pages. Evaluate the arguments of the two
partners. Explain and illustrate their points by identifying the relevant
and irrelevant costs for this decision.

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Contribution Analysis. Explain what is meant by contribution analysis.
Carefully define the term and provide examples to illustrate it.

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## BUS 640 Week 3 Production Cost Analysis and Estimation

Applied Problems (New)

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Production Cost Analysis and Estimation Applied Problems

Problem 1:

## William is the owner of a small pizza shop and is thinking of increasing

products and lowering costs. Williams pizza shop owns four ovens and
the cost of the four ovens is \$1,000. Each worker is paid \$500 per week.

Workers employed

## Qty of pizzas produced per week

75

180
3

360

600

900

1140

1260

1360

each question in complete sentences, whenever it is necessary.

Which inputs are fixed and which are variable in the production
function of Williams pizza shop? Over what ranges do there appear to
be increasing, constant, and/or diminishing returns to the number of
workers employed?
What number of workers appears to be most efficient in terms of pizza
product per worker?

## What number of workers appears to minimize the marginal cost of

pizza production assuming that each pizza worker is paid \$500 per
week?

Why would marginal productivity decline when you hire more workers
in the short run after a certain level?

## How would expanding the business affect the economies of scale?

When would you have constant returns to scale or diseconomies of

Problem 2:

The Paradise Shoes Company has estimated its weekly TVC function
from data collected over the past several months, as TVC = 3450 + 20Q
+ 0.008Q2 where TVC represents the total variable cost and Q
represents pairs of shoes produced per week. And its demand equation
is Q = 4100 25P. The company is currently producing 1,000 pairs of
shoes weekly and is considering expanding its output to 1,200 pairs of
shoes weekly. To do this, it will have to lease another shoe-making
machine (\$2,000 per week fixed payment until the lease period ends).
each item below in complete sentences, whenever it is necessary.

Describe and derive an expression for the marginal cost (MC) curve.

Describe and estimate the incremental costs of the extra 200 pairs per
week (from 1,000 pairs to 1,200 pairs of shoes).

What are the profit-maximizing price and output levels for Paradise
Shoes? Describe and calculate the profit-maximizing price and output.

Discuss whether or not Paradise Shoes should expand its output further
beyond 1,200 pairs per week. State all assumptions and qualifications

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Strategic Behavior Oligopolies. An interesting example of strategic
behavior comes from a 1997 article about Microsofts investment in
Apple (New Straits Times, 1997). The article is included in the Required
Readings list. Facing tough anti-trust scrutiny from government
agencies, Microsoft provided financial support to Apple in order to
ensure Apples survival and, therefore, to ensure that competitiveness
in the industry remains. Moreover, the partnership with Apple provided
an additional market for Microsofts products the MS Office and the
IE products were to be bundled with the MAC OS as one of the
conditions for this financing. Discuss this case in the context of market
structure and strategic behavior. What market structure do these firms
operate in? Why did Microsoft need to preserve competitiveness in the
industry? What was Microsoft afraid of in the event that Apple did not
survive?

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Local Market Power. Bulls Eye department store specializes in the sales
of discounted clothing, shoes, household items, etc. similar to the
offerings at a regular Walmart or Target. Bulls Eye is the only
department store in Show Low and the nearest other discount retailer
is Target, located 49 miles away in Eagar. Bulls Eye, therefore, has some
market power in its local area. Despite having some market power,
Bulls Eye is currently suffering losses. An analyst at Bulls Eye is
recommending to the manager to raise prices, so that profitability can
be improved. The manager is unsure of this strategy as recent data
points to increasing numbers of individuals shopping more and more.
What are the pros and cons of raising the prices at Bulls Eye and would
that strategy be profitable?

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BUS 640 Week 4 Journal Economics in News

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BUS 640 Week 4 Journal Economics in News

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## BUS 640 Week 4 Market Structures and Pricing Decisions

Applied Problems (New)

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Market Structures and Pricing Decisions Applied Problems.

Problem 1:

## produces vacuum cleaners and belongs to a monopolistically

competitive market. Its
demand curve for the product is expressed as Q = 5000 25P where Q
is the number of

have determined

0.02Q2.

each question in

## complete sentences, whenever it is necessary.

a. What are the profit-maximizing price and output levels? Explain them
and calculate

(marginal

## cost), D (demand), and MR (marginal revenue) curves graphically and

illustrate the

equilibrium point.

b. How much economic profit do you expect that Roberts company will
make in the

first year?

## c. Do you expect this economic profit level to continue in subsequent

years? Why or

why not?
Problem 2:

Greener Grass Company (GGC) competes with its main rival, Better
Lawns and Gardens

## (BLG), in the supply and installation of in-ground lawn watering systems

in the wealthy

western suburbs of a major east-coast city. Last year, GGCs price for
the typical lawn

system was \$1,900 compared with BLGs price of \$2,100. GGC installed
9,960 systems, or

about 60% of total sales and BLG installed the rest. (No doubt many

## were installed by do-it-yourself homeowners because the parts are

hardware stores.)

## GGC has substantial excess capacityit could easily install 25,000

systems annually, as it

has all the necessary equipment and can easily hire and train installers.
Accordingly, GGC

## is considering expansion into the eastern suburbs, where the

homeowners are less wealthy.

In past years, both GGC and BLG have installed several hundred
systems in the eastern
suburbs but generally their sales efforts are met with the response that
the systems are too

expensive. GGC has hired you to recommend a pricing strategy for both
the western and

eastern suburb markets for this coming season. You have estimated
two distinct demand

functions, as follows:

## Qe = 36620 - 25Pge + 7Pbe + 1180Ag - 950Ab + 0.085Ye

for the eastern market, where Q refers to the number of units sold; P
refers to price level; A

## refers to advertising budgets of the firms (in millions); Y refers to

average disposable

## income levels of the potential customers; the subscripts w and e refer

to the western and

and BLG,

## year and expects BLG to spend \$1.2 million (use Ab = 1.2) on

household disposable income is \$60,000 in the western suburbs and
\$30,000 in the eastern

suburbs. GGC does not expect BLG to change its price from last year
because it has

already distributed its glossy brochures (with the \$2,100 price stated) in
both suburbs, and

its TV commercial has already been produced. GGCs cost structure has
been estimated as

## TVC = 750Q + 0.005Q2, where Q represents single lawn watering

systems.

each item below in

## a. Derive the demand curves for GGCs product in each market.

b. Derive GGCs marginal revenue (MR) and marginal cost (MC) curves
in each

market. Show graphically GGCs demand, MR, and MC curves for each
market.

and the prices

## d. Calculate the price elasticities of demand in each market and discuss

these in
relation to the prices to be charged in each market.

qualifications

## you may have concerning your price recommendations.

Reference:.

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Good Will in Price Bidding. Sometimes, a bidder on a work contract may
bid lower than what would maximize his/her profit from the contract
and the reason for that is to create goodwill (to increase expected
that is obtained in this way?

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New Product Introduction. Bayer Schering Pharma AG, Germany owns
the Alka-Seltzer, which was launched in 1931 and was meant for relief
of minor aches, pains, inflammation, fever, headache, heartburn, sour
stomach, indigestion, and hangovers. The Alka-Seltzer Plus was a spin-
off of the original medicine, meant to relieve colds and flu.

## The company has recently introduced a new and improved Alka-Seltzer

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Problems (New)

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Week 5 Assignment

## Please complete the following two applied problems:

Problem 1:
Jessica Alba, a famous actress, starts the baby and family products
business, The Honest Company, with Christopher Gavigan. Alba and
Gavigan set up their site so families can choose what kinds of non-toxic,
all-natural products they'd like to use and get them in a bundle.
Families can choose all kinds of products from food to hygiene
necessities and cleaning supplies. Suppose they are thinking of
expanding their business into five domestic markets: Phoenix, Dallas,
Chicago, New York, and Atlanta. Assume their primary goal of business
is to maximize economic profits, although they want to do business
honestly.

question in three- to five-complete sentences.

You are a business adviser for Alba and Gavigan. Describe a skimming
price and a penetration price, and advise them whether they should
charge a skimming price or a penetration price, with supportive
reasoning for and against each pricing alternative.

Are they likely to make economic profits initially? Can they continue to
make economic profits in the long term? Why or why not? Discuss.

What advice would you give to Alba and Gavigan to help them make
more profit in the long term?

Problem 2:
You operate your own small building company and have decided to bid
on a government contract to build a pedestrian walkway in a national
park during the coming winter. The walkway is to be of standard
government design and should involve no unexpected costs. Your
present capacity utilization rate is moderate and allows sufficient scope
to understand this contract, if you win it. You calculate your
incremental costs to be \$268,000 and your fully allocated costs to be
\$440,000. Your usual practice is to add between 60% and 80% to your
incremental costs, depending on capacity utilization rate and other
factors. You expect three other firms to also bid on this contract, and
you have assembled the following competitor intelligence about those
companies.

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Game Theory and Strategic Behavior. Suppose that GE is trying to
prevent Maytag from entering the market for high efficiency clothes
dryers. Even though high efficiency dryers are more costly to produce,
they are also more profitable as they command sufficiently higher
prices from consumers. The following payoffs table shows the annual
profits for GE and Maytag for the advertising spending and entry
decisions that they are facing.

## Based on this information, can GE successfully prevent Maytag from

entering this market by increasing its advertising levels? What is the
equilibrium outcome in this game?

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Sustainable Competitive Advantage. Describe the circumstances under
which a firm chooses a low-cost strategy to attain sustainable
differentiation strategy is chosen? Provide specific real world examples.

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We have another set of final paper based on walmart which could be
Focus of the Final Paper

## Research a specific company of your choice and identify some of the

managerial decisions that were made over time and in response to
changes in its market or competitive environment. Use the Ashford
University Online Library and web-based sources for your research. At
least three external scholarly sources must be used. Address all of the
following areas:

Describe the company and provide a brief history of its operations. Find
or use graphs to illustrate its financial performance over the years.

## Identify any sources of risk or uncertainty in its operations. Do the

financial reports indicate risky or uncertain activities or changes to the
economic environment that ultimately appear to have affected the
companys financial outcomes? Be specific.

## Are there any government regulations that have affected this

companys operations domestically or abroad? Explain.

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We have another set of Final Paper based on Apple company, it could

## Research a specific company of your choice and identify some of the

managerial decisions that were made over time and in response to
changes in its market or competitive environment. Use Ashford
University Online library and web-based resources for your research. At
least 3 external resources must be used. Address all of the following
areas:

## Focus of the Final Paper

Describe the company and provide a brief history of its operations. Find
or use graphs to illustrate its financial performance over the years.
Identify any sources of risk or uncertainty in its operations. Do the
financial reports indicate risky or uncertain activities or changes to the
economic environment that ultimately appear to have affected the
companys financial outcomes? Be specific.

## Are there any government regulations that have affected this

companys operations domestically or abroad? Explain.

Describe the inputs that are used in this companys production function
and identify any challenges to securing these inputs.

## Determine if the company has introduced new products in existing

markets or created new markets over time. What is the impact on its
finances?

## Determine if the price of its products increased or declined over time

and analyze the reasons for price fluctuations. Study the demand
elasticity for its products and discuss the availability of close substitutes
for its products. How does that affect pricing decisions?

## Analyze the companys profitability. Identify the economy or industry

influences on its costs, operations, and profitability.

## Describe the competitive environment in which the firm operates, the

distribution of market power, and the strategic behavior of the firm and
its competitors. Apply your knowledge of the theory of this companys
market structure. How does the company make pricing and production
decisions? Is your observation supported by the theoretical models?
Refer to the financial reports for illustration.

## Identify any non-price competitive strategies that the company might

be engaging in? Provide specific examples.
Evaluate if the company made any mistakes in its decisions over time,
and recommend any changes or improvements for the future
operations. Refer to the financial reports when making specific
observations or recommendations.

## Use economic language and demonstrate your understanding of the

concepts and theories of this course.

## 1. Must be 8 to 10 double-spaced pages in length, and formatted

according to APA style as outlined in the Ashford Writing Center.

## 2. Must include a title page with the following:

a. Title of paper

b. Students name

## c. Course name and number

d. Instructors name
e. Date submitted

statement.

Writing Center.

## 8. Must include a separate reference page, formatted according to APA

style as outlined in the Ashford Writing Center.
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