Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
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Chapter 9, Problem 1.8CE
To determine
To ascertain the existence of scale of economics or diseconomies in operating a public high school based on the result of the study.
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The following cost-output data were obtained as part of a study of the economies of scale in operating a charter high school in Wisconsin:
(see attachment)
3. What type of cost-output relationship (linear, quadratic, cubic) is suggested by these statistical results?
4.What variables (other than enrollment) would appear to be most important in explaining variations in operating expenditures per student?
5.Holding constant the effects of the other variables ( through ), determine the enrollment level (Q) at which average operating expenditures per student are minimized. (Hint: Find the value of Q that minimizes the (∂C/∂Q function.)
6.Again, holding constant the effects of the other variables, use the ∂C/ ∂Q function to determine, for a school with 500 students, the reduction in per-student operating expenditures that will occur as the result of adding one more student.
7.Again, holding the other variables constant, what would be the saving in perstudent operating expenditures of an…
Cost-volume-profit (CVP) analysis is used to seek answers to questions such as: “What will happen to the profit if the firm increases its selling price by 15%?” Discuss the following under CVP analysis (present graphical representations where applicable):i. The contribution graph
Someday, if you want to be an economist or to study more about economic analysis, what platform you will implement to sustain the development of cost estimating fundamentals?
Chapter 9 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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- Again, holding the other variables constant, what would be the saving in per-student operating expenditures of an increase in enrollment from 500 to 1,000?arrow_forwardA South African car manufacturer has the following total revenue and total coststructures:T R = 8Q − Q2T C =1/3Q3 − 10Q2 + 80Q + 500How many cars should the firm produce if its goal is to maximize profits?arrow_forwardEmco Company has an assembly line of fixed size A. Total output is a function of the number of workers (crew size) as shown in the following schedule: Crew Size Total Output (No. of Workers) (No. of Units) 0 0 1 10 2 35 3 50 4 56 5 59 6 60 7 60 8 58 Determine the following schedules: (a) Marginal productivity of labor (b) Average productivity of labor (c) (d) Elasticity of production with respect to labor Draw and Show relationship MPL & APLarrow_forward
- The following cost-output data were obtained as part of a study of the economies of scale in operating a charter high school in Wisconsin: Students in Average Daily Attendance Midpoint of Values in Column A Operating Expenditure per Student Number of Schools in Sample (A) (B) (C) (D) 143-200 171 $531.9 6 201-300 250 480.8 12 301-400 350 446.3 19 401-500 450 426.9 17 501-600 550 442.6 14 601-700 650 413.1 13 701-900 800 374.3 9 901-1100 1000 433.2 6 1101-1600 1350 407.3 6 1601-2400 2000 405.6 7 Plot the data in columns B and C in an output (enrollment-) cost graph and sketch a smooth curve that would appear to provide a good fit to the data. Based on the scatter diagram in Question 1, what kind of mathematical relationship would appear to exist between enrollment and operating expenditures per student? In other words, do operating expenditures per student appear…arrow_forwardWhich cost concept is used to determine the most cost-efficient level of production? a) Average cost b) Total cost c) Marginal cost d) Variable costarrow_forward(a) How would one estimate the full cost to an airline if one of its planes is held over for 24 hours in an airport for repair? (b) A company has spent $10 million to develop a product for market. During the product’s first two years, the company’s profit was $6 million. In recent years, the market was flooded by rival products and now the company is reassessing its product. If it abandons the product, it can recover $2 million of its original investment by selling its production facility. If it continues to produce the product, its estimated revenues for successive two-year periods will be $5 million and $3 million and its costs will be $4 million and $2.5 million. (After four years the plant will have zero resale value.) What would be the company’s best course of action? (c) Two decades ago, the global demand and supply curves for copper were: Qd = 15-10P and Qs = -3 + 14P, where Q is measured in millions of metric tons per year. Find the competitive price and quantity. Suppose that…arrow_forward
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