Managerial Economics

Instructions: This assignment must be done in APA format.  This part of the assignment is questions based off of two case studies to be answered with a minimum word count of 1600 for the overall assignment (without references included).  A minimum of four (4) references along with in-text citations is required for this assignment.

Please note: The word count for the overall assignment is 1600 words(not including references). The required reference count for the overall assignment is 4 references. Also, although this assignment is in APA format; please keep the question and answer line up (see example below).

For example: Question: XYZ

Answer:XYZ

Reference: XYZ

 

  1. On the first day of the new year to get her business started, the owner/photographer of Exquisite Portraits Inc. paid $200 for business cards, $1,000 for a listing in Yellow Pages, and $250 for an annual business license. She also leased a professional portrait camera and studio lighting equipment by signing an agreement to pay a monthly lease of $1,000 each month for the next 12 months. This lease is ironclad: She must pay for all 12 months, and she cannot sublease to anyone else. She rents her office and studio for $1,400 per month that must be paid at the beginning of each month. She does not have a lease on the office/studio, so she can vacate the office/studio at the end of any month should she decide to move to a new location or to go out of business. After she opens the office/studio on the first day of each month, her monthly cost of electricity for lighting the office and running her coffee machine is constant at $45 per month, because she always keeps the lights on in the office and drinks the same amount of coffee no matter how many photos she shoots each month. Additional electricity is required for the portrait studio lights, which varies directly with the number of hours the lights are used each month for photo sessions. Last year, before starting this business, the owner of Exquisite Portraits Inc. earned a salary of $5,000 per month working at a bank. Answer the following questions about the costs for Exquisite Portraits Inc.:
  • What are monthly fixed costs, quasi-fixed costs, and variable costs for Exquisite Portraits Inc.?
  • If the owner of Exquisite Portraits Inc. wants to close her studio and go out of business at the end of August, identify her sunk costs and avoidable costs.
  • At the end of August, what role would the sunk costs play in the owner /photographer’s decision to go out of business?
  • In making her decision to start her own business, would her decision have been more or less difficult to make if sunk costs were zero at Exquisite Portraits? Explain.

 

  1. Water Works Plumbing Company is a small owner-managed plumbing services company that serves the greater Miami metropolitan area. Identify each of the following costs as either a vari­able, a fixed, or a quasi-fixed cost:
  • Gasoline expense for the service van.
  • Cost of a complete set of tools needed to be a plumber.
  • Labor expense for an assistant plumber who is hired on an hourly basis and works with the owner-manager of the firm when the owner needs a helper.
  • Monthly lease payment for a drain-line auger, which contractually binds WW Plumbing to pay $75 per month for the next 12 months, regardless of how much or how little the company uses the leased piece of plumbing equipment.  Subleasing is prohibited and there will be no refund if the machine is returned before the 12 month period expires.
  • Cost of the owner’s time to run the plumbing business.
  • Expense for plumbing service consumables: plumbers’ putty, Teflon tape, pipe lubricant, sandpaper, PVC glue, butane for torch, etc.

 

  1. Total variable costs over the output range 20,000 to 30,000 units is given in the table below.  Fill in the missing values and then answer the following questions.
Q Total variable cost Average variable cost Marginal cost
20,000 $37,400 ________  
25,000 46,750 ________ ________
30,000 56,100 ________ ________

 

  • Are average variable costs rising, falling, or constant over the output range 20,000 to 30,000 units?
  • Describe the relation between average variable cost and marginal cost over this output range.

 

Part Two

Please write a 150 word response to each discussion post with a minimum of one reference each.

 

Note: Write responses as if you are talking back to that person.

 

  1. No, energy efficiency is not the same thing as economic efficiency. Energy efficiency is the percentage of total energy input to a machine or equipment that is consumed in useful work and not wasted as useless heat (Thomas, & Maurice, 2010). An example of this is energy efficiency allowing consumers to save on their resources such as gas, electrical energy, and preserve fuel; or even insulation of their home to maintain the temperature desired.  Economic efficiency is the situation in which it is impossible to generate a larger welfare total from the available resources, such as the situation where some people cannot be made better-off by reallocating the resources or goods, without making others worse-off. It indicates that a balance between benefit and loss has been achieved. Economic efficiency example is value for the money such as value embraces not just gas mileage but car design, acceleration, safety, and reliability. Money includes not just the price of car and gas, but also cost and frequency of maintenance and repairs, interest cost of the car loan, and any other daily operation cost.

The energy-efficient automobile described here maybe economically efficient by the ability to be driven 180 miles on a single gallon of unleaded gasoline. The car is energy efficient due to the abilities to save resources such as gas by preserving fuel. Economic efficiency occurs due to the cost of the car and the gas saved.

The most benefit from its limited resources is from energy-saving vehicles. Economic efficiency is important but we build the energy-saving automobile because increasing energy efficiency often costs money up-front but in many cases this capital outlay will be paid back in the form of reduced energy costs within a short time period. However not everyone can afford to pay the cost up front so an economic efficient vehicle is needed (Thomas, & Maurice, 2010).   When energy efficient automobiles are economical than it will be a way all people can benefit from both energy and economically (Hamlen&Tschirhart, 1980).

 

 

  1. Energy efficiency is not the same as economic efficiency. As the text explains, economic efficiency is the ability to produce the maximum output at the lowest possible cost (Thomas & Maurice, 2010). Energy efficiency focuses on the wise use of limited natural resources in the creation of energy for consumption.  Energy efficiency can be described as the enhancement in the productivity with which energy is utilized to deliver a specific product or service and this advancement is calculated in units of output per energy unit (Linares &Labandeira, 2010).

Automakers may be able to produce the prototype automobile listed above at a price which maximizes their use of inputs and results in the lowest of possible costs, yet, if they are not able to produce the vehicle at a price which is at the level equal to the amount the consumer deems valuable based on its exceptional fuel efficiency, they will not be able to sell the vehicles and maximize profit.  Although personally I wish we could ignore economic efficiency and focus on energy efficiency as our planet is paying the price of not doing so, businesses are in it to maximize profit and cannot do that without accepting the realities of the necessity of attaining economic efficiency.

 

 

 

Last Updated on February 11, 2019 by Essay Pro