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Price/Output Determination. Columbia Cars Inc., a rapidly expanding new entrant to this metropolitan area, is considering two proposals for the provision of its cosmetic detailing of cars (washing, waxing, polishing, engine cleaning, etc.). First, a large janitorial agency with some experience in the detailing of cars has offered to purchase the business detailing equipment in return for an exclusive franchise. A second proposal would allow several small contractors to enter the business without any exclusive franchise agreement or competitive restrictions. Under this plan, individuals would bid for the right to provide service on groups of cars as they were delivered to the lot, presumably based on how busy they were at the time. The car lot would then allocate business to the lowest bidder. CC Inc. has conducted a study of its past sales records and the amount of detailing spent on each car, and the premium over book value recouped in the sale to estimate the amount they would be willing to pay for various amounts of detailing. The car lot has also estimated the total cost of service per car. Service costs are expected to be the same whether or not an exclusive franchise is granted. To instigate bidding, CC Inc. guarantees the winner of any bid a minimum per car, whether or not the service is used. A. Use the indicated price and cost data to complete the following table. Hours of Detailing per Car Price per Hour Total Revenue Marginal Revenue Total Cost Marginal Cost 0 $24.00 $ 0.00 1 23.40 18.00 2 22.80 36.00 3 22.20 54.00 4 21.60 72.00 5 21.00 90.00 6 20.40 108.00 7 19.80 126.00 8 19.20 144.00 9 18.60 162.00 10 18.00 180.00 B. Determine price and the level of service if competitive bidding results in a perfectly competitive price/output combination. C. Determine price and the level of service if the car lot grants a monopoly franchise.
Leopold Bus Company runs daily service between Bigcity and Tinytown. It calculates that the average cost per trip (wages, gas, insurance, payments on loans, etc.) is $140. Will the sales of the standby tickets cover the average costs of the extra pas..
Discuss political economy of euro. What are likely economic effects of euro. What are its likely political effects. How is euro supposed to solve EU's political problems. Explain
It would not pay a firm to produce anything in the short run if price were:
For each of the following, describe some of the potential opportunity costs:
Cyclical unemployment and the natural rate of unemployment are sometimes hard to distinguish from each other, so economists are not very confident about estimates of the natural rate of unemployment. Still, since unemployment rates are consistently h..
The country of Hykania does not trade with any other country. Its GDP is $20 billion. Its government purchases $3 billion worth of goods and services each year, collects $3 billion in taxes, and provides $2 billion in transfer payments to households...
Over the last decade, several firms have entered this industry and, as a consequence, Forey is earning a return on investment that roughly equals the interest rate.which market structure best characterizes the industry
Find the effective annual interest rate (b) Use your result in (a) to find the value of the investment immediately after the 10th investment (use the algebraic form of any interest factors used).
George purchased a $10,000 bond that pays a nominal interest rate of 8 percent per year. George's marginal income tax rate is 28 percent. Over the last year, inflation was 3 percent. Find George's before-tax real interest rate and his after-tax real ..
q1. why might you expect to see flat royalty payments in home-based franchises but revenue-based royalties in
One of the criticisms of oligopolies is the adverse impacts these firms have on income distribution. Do you believe that is a valid criticism? Discuss with appropriate examples.
An asset is purchased for $745,000 today. It will have a $76,000 salvage value after 5 years of use. Using the straight-line (SLN) method, calculate the depreciation charge for year 2 and the book value at the end of year 2.
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