Reference no: EM131007994
Kristen and Anna live in the beach town of Santa Monica. They own a small business in which they make wristbands and pot holders and sell them to people on the beach. As shown in the table, Kristen can make 15 wristbands per hour but only 3 pot holders. Anna is a bit slower and can make only 12 wristbands or 2 pot holders in an hour
For Kristen and for Anna, what is the opportunity cost of a pot holder? Who has a comparative advantage in the production of pot holders? Explain your answer.
Assume that Kristen works 20 hours per week in the business. Assuming Kristen is in business on her own, graph the possible combinations of pot holders and wristbands that she could produce in a week. Do the same for Anna.
If Kristen devoted half of her time (10 out of 20 hours) to wristbands and half of her time to pot holders, how many of each would she produce in a week? If Anna did the same, how many of each would she produce? How many wristbands and pot holders would be produced in total?
Suppose that Anna spent all 20 hours of her time on wristbands and Kristen spent 17 hours on pot holders and 3 hours on wristbands. How many of each item would be produced?
Suppose that Kristen and Anna can sell all their wristbands for $1 each and all their pot holders for $5.50 each. If each of them worked 20 hours per week, how should they split their time between wristbands and pot holders? What is their maximum joint revenue?
Value of the additional information
: The company's experts estimate that if they send the fact-finding mission, there's a 70% chance that they'll con- clude there's a 0.4 probability of higher oil prices. What would the value of the additional information be to the company?
|
Determine the equivalent uniform annual cost of costs
: A mechanical engineer must recommend a new heating system to a commercial building owner. The owner intends to sell the building in 15 years. A gas fired furnace option has a design life of 5 years, an initial cost of $10,000, a replacement cost of $..
|
Customers arrive at movie theater at the advertised movie
: Customers arrive at a movie theater at the advertised movie time only to find that they have to sit through several previews and pre preview ads before the movie starts. Many complain that the time devoted to previews is too long (The Wall Street Jou..
|
Advertising strategies evpi
: 1. Advertising strategies EVPI. a) For the advertising strategies of Exercise 25 and using the probability of 0.70 for rising consumer confidence, what is the Expected Value of Perfect Information (EVPI)?
|
What is their maximum joint revenue
: Kristen and Anna live in the beach town of Santa Monica. They own a small business in which they make wristbands and pot holders and sell them to people on the beach. As shown in the table, Kristen can make 15 wristbands per hour but only 3 pot holde..
|
Is the slope of the line positive or negative
: The least squares line for the data since year 1400 is shown on the graph. Is the slope of the line positive or negative? What does this imply? Consider cooperation use (x) as a predictor of average payoff (y). Based on the scattergram, is there ..
|
Probability of rising consumer confidence
: 1. Advertising strategies decisions. For the payoff table in Exercise 17, find the action with the highest expected value. a) If forecasters think the probability of rising consumer confidence is 0.70, what is its expected value?
|
What does the efficiency theory state
: Regarding combined returns on a merger, what does the efficiency theory state, and what do empirical studies suggest? Regarding the same issue, what does the entrenchment theory state, and what do empirical studies suggest?
|
What is the margin of error for confidence interval
: The Wall Street Journal reported that automobile crashes cost the United States $162 billion annually (The Wall Street Journal, March 5, 2008). The average cost per person for crashes in the Tampa, Florida, area was reported to be $1599. What is the ..
|