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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.
If an industry is a Cournot duopoly, what are the firm’s reaction functions? If an industry is a Cournot duopoly, what is the equilibrium price and output? What are the profits for each firm? Illustrate the firm’s pricing and output decision in a gra..
An economy has a consumption function of C = 400 + .75(DI) The following values are fixed : G , T = 1000 NX = 50 I = 750 Suppose that the CPI ( i.e., the "Price Level") is currently equal to 115. What is the equilibrium real GDP (on the demand side)?
In a country with a labor force of 200 people, a different group of 10 people becomes unemployed each month but becomes employed once again a month later. No others outside these groups are unemployed. A. What is the country’s unemployment rate? B. W..
What were the two tenets or beliefs of mercantilism that the classical economists found to be objectionable? What was the role of money in the mercantilist thinking and what was the role of money in the classical viewpoint?
Under very high rates of inflation, why would people prefer to use a barter system to buy goods, rather than use paper money.
Meagan deposits $750 from her piggy bank into her checking account at Regions National Bank. The reserve requirement is 10% and the bank has no excess reserves. What is the immediate effect on the M1 measure of the money supply of her deposit? Explai..
Describe the impact of a payroll tax on wages and employment in a competitive industry. Why is part of the tax shifted to workers? What is the deadweight loss of the payroll tax?
In the argument for why perfect competition is allocatively efficient, the price that people are willing to pay represents the gains to society and the marginal cost to the firm represents the costs to society. Can you think of some social costs or i..
The duration of copyright increased under U.S. law in several steps since the eighteenth century until it reached the life of the author plus 70 years. Suppose that a writer completes a novel at age 40. If the writer lives to be 75, then the copyrigh..
Brief overview of monetary policy. Brief overview of the Board of Governors. What are Ben Bernanke views on the present state of the economy?
currently at a price of 2 each 250 popsicles are sold per day in the perpetually hot town of rostin. consider the
Kathy's Bakery is a local full-service bakery in Omaha, Nebraska. Kathy sells loaves of wheat bread for $3 a loaf. Of this amount, $1.50 is profit contribution. Assuming average variable costs are constant at all output levels, what is Kathy's total ..
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