Reference no: EM131449104

U.S cigarette makers face enormous punitive damage penalties after losing a series of class=action law suits that heaped penalties amounting to several hundred billion dollars "the damage (to cigarette maker) is generally under control." What action do you suppose the cigarette companies too tl avoid bankruptcy? Why did this action succeed?

Milo Geyelin and Gordon Fairclough, "Tobacco Industry has resources for coping with huge jury award" The Wall Street Journal, July 17, 2000.

The Zenvox Television Company faces a demand function for its products that can be expressed as Q = 4,000 - P + 0.5I, where Q is the number of televisions, P is the price per television, and I is average monthly income. Average monthly income is currently equal to $2,000. Answer the following questions.

a. Graph the demand curve (sometimes called the "inverse" demand curve) faced by Zenvox at the current income level. Be sure to label this and all graphs you draw carefully. On the same graph, depict marginal revenue. At what price and quantity is Zenvox's total revenue maximized? What is the marginal revenue at this point? Show the calculation.

b. What is the price elasticity of Zenvox's demand function at the price and quantity derived in part (a)? Explain what this value means in words.

c. Why might Zenvox choose to produce at a price and quantity different than that derived in part (a)?

Please read the following online articles that discusses the fact that some states in U.S. are considering raising the minimum wage and some of the issues involved in it:

https://www.huffingtonpost.com/2013/07/29/mcdonalds-salaries_n_3672006.html

https://www.cnbc.com/2016/03/31/how-higher-minimum-wages-will-impact-mcdonalds.html

Question: How would you evaluate the potential impact of increasing wages for McDonald's workers?  What would you expect to happen to the prices of McDonald's products to consumers, the number of people employed by the corporation, and the profits of the corporation?

Focus: Apply marginalist concepts as you evaluate the potential impact of raising wages for workers in the organization.